SAVINGS 


Savings  Institutions 


JAMES  HENRY  HAMILTON,  Ph.D. 

Professor  of  Sociology  in  Syracuse  University 


lew  loth 
THE   MACMILLAN   COMPANY 

LONDON:  MACMILLAN  &  CO.,  Ltd. 

1903 

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Copyright,   1902, 

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AFFECTIONATELY  DEDICATED 


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MY  FATHER 
ROBERT  ALEXANDER  HAMILTON 


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PREFACE 

The  author  commenced  a  study  of  munici- 
pal and  post-office  savings  banks  while  a  stu- 
dent in  the  German  universities.  It  was,  in 
part,  his  purpose  to  complete  a  work  in  this 
field  to  be  submitted  for  the  doctor's  degree ; 
and  this  essay,  in  an  early  stage  of  its  develop- 
ment, served  as  a  doctor's  thesis  at  the  Uni- 
versity of  Wisconsin.  Since  then  the  present 
widely  inclusive  character  has  been  given  to 
the  study,  according  to  a  determination  of  the 
author  formed  while  he  was  pursuing  his  work 
within  the  restricted  boundaries  he  had  set  for 
himself  with  reference  to  the  immediate  ob- 
ject in  view.  The  practice  of  saving  seemed 
to  him  to  constitute  the  most  important  sub- 
ject within  the  field  of  social  economics,  or 
applied  sociology,  and  at  the  same  time  it 
seemed  to  be  the  most  neglected.     The  most 

(3) 


4  SAVINGS    INSTITUTIONS 

popular  subjects  for  really  scientific  treatment 
of  this  class  within  recent  years  have  had  to 
do  with  such  superficial  evidences  of  the  well 
being  of  the  laboring  classes  as  the  length  of 
the  working  day,  factory  conditions,  and  the 
amount  of  wages.  The  extent  of  the  saving 
habit  is  certainly  a  more  reliable  key  to  the 
substantial  well  being  of  the  people,  and  the 
extent  of  the  facilities  for  its  development 
must  promise  an  improvement  which  enters 
deeper  into  the  grain  of  the  working  classes 
than  the  opportunities  which  generous  wages 
and  short  hours  afford.  It  is  very  far  from 
the  author's  purpose  to  depreciate  the  work 
that  has  been  done  in  these  lines ;  it  is  his  pur- 
pose simply  to  note  the  unsatisfactory  status 
of  the  hterature  of  social  economics  with  the 
most  fundamental  principle  left  out.  The 
condition  is  all  the  more  remarkable  in  view 
of  the  development  of  savings  institutions 
during  the  nineteenth  century, — particularly 
the  last  half  of  it.  There  have  been  valuable 
rontrihntions   to    periodical   literature,  and   a 


PREFACE  5 

very  few  monographs  devoted  to  special  insti- 
tutions, but  there  has  been  lacking  the  Unk 
connecting  the  institutions  with  the  principle 
which  they  are  designed  to  vitalize.  There  is 
also  lacking  a  judicial  review  of  the  different 
types  of  savings  institutions  with  reference  to 
their  comparative  quahfications  for  infusing 
the  people  with  the  savings  energy.  It  is 
sought  chiefly  in  the  following  pages  to  direct 
attention  to  these  two  objects. 

The  author  has  received  many  kind  and 
helpful  suggestions  from  others  during  the 
progress  of  his  work  for  which  he  is  deeply 
grateful.  He  has  decided,  however,  to  abstain 
from  the  usual  policy  of  public  acknowledge- 
ment. But  there  must  be  one  exception  to 
this  rule.  He  must  express  his  deep  and 
lasting  gratitude  to  his  master,  Professor 
Geheimrat  J.  Conrad,  of  the  University  of 
Halle,  at  whose  suggestion  this  work  was 
initiated.  Every  American  student  who  has 
passed  under  the  hands  of  Professor  Conrad, 
especially  of  those  who  have  enjoyed  the  privi- 


6  SAVINGS    INSTITUTIONS 

lege  of  working  with  him  in  his  research 
seminar,  knows  what  his  virile  scholarship 
and  his  warm  sympathy  mean.  A  personal 
contact  with  these  qualities  has  done  the  most 
to  give  the  author  heart  and  courage  for  this 
work.  This  exception  is  made  because  of  the 
further  fact  that  Professor  Conrad  cannot  be 
held  responsible  for  any  mistakes  or  weak 
points ;  his  aid  was  given  when  the  work  was 
in  the  earliest  stages  of  its  development  and 
he  has  not  read  any  of  the  manuscript. 

The  author  wishes  also  to  acknowledge  the 
courtesies  of  the  editors  of  the  Annals  of  the 
American  Academy  of  Political  and  Social 
Science  and  of  the  Quarterly  Journal  of  Eco- 
nomics in  allowing  him  to  incorporate  matter 
which  has  appeared  in  the  form  of  articles  in 
these  magazines. 

J.  H.  H. 

Syracuse,  N.  F.,  May  21,  1902. 


CONTENTS 
Chapter  I 

Pagx 

The  Theory  of  Savings 9 

Chapter  II 
Educational  Aspects  of  Saving 42 

Chapter  III 
Savings  and  Insurance 88 

Chapter  IV 
Building  and  Loan  Associations 129 

Chapter  V 
Savings  Banks 149 

Chapter  VI 
Trustee  Savings  Banks 181 

Charier  VII 

Co- Operative  Savings  banks 223 

Chapter  VIII 
Municipal  Savings  Banks 256 

Chapter  IX 
Postal  Savings  Banks 300 


8  SAVINGS    INSTITUTIONS 

Chapter  X 
Postal  Savings  Banks  in  England 330 

Chapter  XI 
Postal  Savings  Banks  on  the  Continent 357 

Chapter  XII 
Postal  Savings  Banks  in  Other  Countries.. 409 

Chapter  XIII 

Conclusion 423 

Bibliography 429 

Index 433 


Savings  and  Savings  Institutions 

CHAPTER  I 

THE   THEORY  OF  SAVINGS 

Savings  and  savings  institutions  have  gen- 
erally been  treated  as  two  separate  subjects, 
and,  by  two  distinct  classes  of  writers — 
economists  and  reformers. 

Economists  have  generally  treated  savings 
exclusively  as  a  source  of  capital;  while  dis- 
cussing the  abstract  science  of  savings,  they 
have  neglected  to  treat  of  those  institutions, 
which  are  designed  to  promote  savings  among 
the  people.  Had  they  grasped  with  sufficient 
clearness  the  broader  aspect  of  the  subject, 
they  would  have  had  more  to  say  about  its 
influence  on  the  distribution  of  wealth,  and 
more  about  its  influence  in  changing  the  char- 
acter of  consumption  goods,  and,  indeed,  they 

(9) 


10  SAVINGS    INSTITUTIONS 

might  have  found  the  subject  related  also  to 
the  exchange  of  wealth. 

The  popular  writers,  on  the  other  hand, 
have  quite  naturally  set  forth  the  social  influ- 
ences of  saving  institutions  to  the  neglect  of 
the  deeper  and  more  scientific  aspects  of  the 
subject;  they  have  neglected  to  treat  of  the 
relation  between  savings  and  capital,  and  the 
relation  of  the  saving  habit  to  the  quantity 
of  labor.  They  have  been  in  fact  ex  parte, 
witnesses,  favoring  the  laboring  classes,  or 
seeking  to  raise  members  of  this  class  into  the 
class  of  capitalists.  Dr.  Karl  Roscher,  while 
not  a  popular  writer,  very  well  represents  the 
general  attitude  of  this  class  of  writers  when 
he  tersely  designates  the  savings  banks  as 
"  the  elementary  school  of  capitalism  ".  ^ 

It  must  be  admitted  that  the  narrow  method 
of  treatment  adopted  by  popular  writers  has 
value  for  their  purposes,  which  are  to  incline 
individuals  to  use  the  facilities  provided,  to 
influence  public  spirited  men  to  organize  sav- 

'  System  iler  Volkncirtsechaft,  lb94,  p.  211. 


THE   THEORY   OF   SAVINGS  11 

ings  banks  for  the  benefit  of  the  wage  earning 
classes,  to  persuade  city  authorities  to  make 
the  savings  banks  a  feature  of  municipal 
activity,  and  to  arouse  states  to  action  in  this 
direction.  But,  on  the  other  hand,  this  pur- 
pose of  institutional  advocacy  falls  short  of 
its  possibilities  if  the  legislative  body  which 
finally  provides  for,  or  sanctions,  some  form 
of  savings  bank  has  not  the  benefit  of  a  judi- 
cial and  careful  treatment  of  all  the  principles, 
involved.  Certainly  some  of  the  judicial  tem- 
per in  the  treatment  of  the  subject  is  desir- 
able, whether  it  is  to  curb  a  crude  and  extreme 
radicahsm,  or  to  relieve  conservatism  of  a 
sluggishness  born  of  ignorance.  The  peculiar 
nature  of  the  existing  literature  of  the  sub- 
ject seems  to  present  a  demand  for  more,  and 
for  hterature  of  a  modified  kind.  This  must 
serve  as  the  author's  warrant  for  this  con- 
tribution. In  it  he  has  attempted  to  apply  a 
comprehensive  theory  of  savings  to  institu- 
tional savings,  and  to  describe  the  different 
types  of   institutions  with   reference  to  the 


12  SAVINGS    INSTITUTIONS 

peculiar  needs  of  different  sections  and  coun- 
tries. And  he  finds  additional  warrant  in  the 
conclusion,  after  a  considerable  study  in  a 
wide  field  of  experiment,  that  the  time  has 
arrived  when  new  combinations,  and  adapta- 
tions of  features  gathered  from  different 
schemes,  may  be  profitably  made.  He  may 
at  once  admit  that  he  thinks  public  opinion 
in  the  United  States  is  tending  towards  a  con- 
viction that  the  adoption  of  some  form  of 
state  savings  bank  is  desirable. 

A  comprehensive  treatment  of  the  subject 
should  properly  start  with  the  study  of  the 
relation  of  the  savings  habit  to  a  progressive 
productive  power,  a  field  which  has  already 
been  pretty  exhaustively  worked  and  requires 
but  a  cursory  review  here.  The  germ  thought 
in  most  studies  along  this  line  conceives  the 
growth  in  productive  energy  to  be  limited  by 
the  saving  power  of  the  community,  even 
capital  being  a  creature  of  the  saving  habit, 
or  to  quote  from  Adam  Smith : 


THE   THEORY   OF   SA.VINGS  13 

' '  When  the  division  of  labor  has  once  been 
thoroughly  introduced,  the  produce  of  the 
man's  own  labor  can  supply  but  a  very  small 
part  of  his  occasional  wants.  The  far  greater 
part  of  them  are  supplied  by  the  produce  of 
other  men's  labor,  which  he  purchases  with 
the  produce,  or,  what  is  the  same  thing,  with 
the  price  of  the  produce,  of  his  own.  But 
this  purchase  cannot  be  made  till  such  time  as 
the  product  of  his  own  labor  has  not  only  been 
completed,  but  sold.  A  stock  of  goods  of 
different  kinds,  therefore,  must  be  stored  up 
somewhere  sufficient  to  maintain  him,  and  to 
supply  him  with  the  materials  and  the  tools 
of  his  work  till  such  time,  at  least,  as  both 
these  events  can  be  brought  about.  A  weaver 
cannot  apply  himself  entirely  to  his  peculiar 
business,  unless  there  is  beforehand  stored  up 
somewhere,  either  in  his  own  possession  or  in 
that  of  some  other  person,  a  stock  sufficient 
to  maintain  him  and  to  supply  him  with  the 
materials  and  tools  of  his  work  until  he  has 
not  only  completed,  but  sold  his  web.  This 
accumulation  must,  evidently,  be  previous  to 
his  applying  his  industry  for  so  long  a  time  to 
such  a  peculiar  business.  As  the  accumula- 
tion of  stock  must,  in  the  nature  of  things, 
be  previous  to  the  division  of  labor,  so  labor 
can  be  more  and  more  subdivided  in  propor- 
tion as  stock  is  previously  more  and  more  ac- 
cumulated. The  quantity  of  material  which 
the  same  number  of  people  can  work  up  in- 
creases in  a  great  proportion  as  labor  comes  to 
be   more   and  more   subdivided;  and   as   the 


14:  SAVINGS   INSTITUTIONS 

operations  of  each  workman  are  gradually 
reduced  to  a  greater  degree  of  simplicity,  a 
variety  of  new  machines  come  to  be  invented 
for  facilitating  and  abridging  those  operations. 
As  the  division  of  labor  advances,  therefore,  in 
order  to  give  constant  employment  to  an  equal 
number  of  workmen,  an  equal  stock  of  j)ro- 
visions  and  a  greater  stock  of  materials  and 
tools  than  would  have  been  necessary  in  a 
ruder  state  of  things  must  be  accumulated 
beforehand, "  1 

And  James  Mill  tells  us  that  "the  whole 
produce  of  every  community  is  distributed  in- 
to two  great  parts;  that  which  is  destined 
to  be  employed  for  the  purpose  of  reproduc- 
tion, and  that  which  is  destined  to  be  con- 
sumed." And  he  says  further:  "When  the 
annual  production  of  a  country  exceeds  its 
annual  consumption,  it  is  said  to  increase  its 
capital ;  when  its  annual  consumption  at  least 
is  not  replaced  by  its  annual  production,  it  is 
said  to  diminish  its  capital.  Capital  may 
therefore,  be  increased  by  an  increased  pro- 
duction, or  by  a  diminished  consumption. "  ^ 


'  Wealth  of  Nations,  Introduction  to  Book  II. 
*  Commerce  Defended,  p.  79. 


THE   THEORY   OF   SAVINGS  15 

A  distinction  should  be  made  between  eco- 
nomic saving  and  hoarding,  although  the  two 
are  continually  used  interchangeably.  Hoard- 
ing, or  literally  "  laying  by  for  a  rainy  day  ", 
so  far  from  being  friendly  to  capital  or  from 
supplying  the  material  of  which  it  is  com- 
posed, is  detrimental  to  its  growth ;  for  in  so 
far  as  produce  is  stored  it  results  in  a  dimin- 
ished demand  upon  the  productive  energies 
of  society,  both  present  and  future,  to  which 
condition  capital  must  become  adapted. 
This  distinction  may  be  rendered  even  clearer 
by  a  classification  of  products  into  ' '  final  con- 
sumption goods ' '  and,  ' '  productive  consump- 
tion goods".  The  latter  class  of  goods  are 
saved  through  being  consumed,  or,  according 
toJ.  S.  Mill: 

"Although  saved  and  the  result  of  savings,  it 
is  nevertheless  consumed.  The  word  saving 
does  not  imply  that  what  is  saved  is  not  con- 
sumed (nor  even  necessarily  that  its  consump- 
tion is  deferred)  but  only  that  (if  consumed 
immediately)  it  is  not  consumed  by  the  person 
who  saves  it. "  ^ 

^  Principles  of  Political  Economy,  Book  I,  Chapter  V. 


16  SAVINGS    INSTITUTIONS 

And  Jean  Baptiste  Say  thus  expresses  ex- 
actly the  same  idea: 

' '  Productive  capital  cannot  be  accumulated 
by  the  mere  scraping  together  of  values  without 
consuming  them ;  nor  any  otherwise  than  by 
withdrawing  them  from  unproductive,  and 
devoting  them  to  reproductive  consumption. ' '  ^ 

The  late  President  Walker  ingeniously  traces 
the  development  of  more  complicated  forms 
of  production  out  of  primitive  methods 
through  the  growth  of  the  saving  power. 

"At  every  step  of  its  progress,"  he  says, 
"capital  follows  one  law.  It  arises  solely  out 
of  saving.  It  stands  always  for  self  denial 
and  abstinence.  *  *  *  j^  jg  that  portion 
of  wealth  which  is  employed  in  the  production 
of  new  forms  of  wealth.  At  first,  capital  is 
limited  to  the  means  of  subsistence  for  the 
producer.  It  is  not  easy  in  the  first  stage  of 
industrial  progress,  to  lay  by  enough  of  the 
grain  or  the  fish  of  one  season  to  last  until 
the  next.  For  want  of  such  a  store  of  food, 
many  a  tribe  perished.  Many  another  was 
kept  in  a  low,  miserable  condition,  unable  to 
shift  its  seat  to  more  promising  localities,  and 
was  continually  depleted  by  famine  and  dis- 
ease, but  when  a  tribe,  by  exceptional  good 

^  Political  Economy,  translated  from  the  fourth  edition  of 
the  French,  p.  111. 


THE   THEORY   OF   SAVINGS  IT 

fortune,  or  through  prudence  and  self  control, 
acquired  a  reserve  sufficient  for  a  full  year's 
subsistence,  it  became  in  a  degree  master  of 
its  condition.  It  could  shift  its  seat  to  better 
hunting  or  fishing  grounds.  It  could  pursue 
its  avocations  systematically  and  economically, 
doing  that  which  should  be  esteemed  most  pro- 
ductive in  the  long  run,  not,  as  before,  hur- 
riedly and  wastefuUy,  under  the  stress  of  im- 
mediate want.  It  is  likewise  through  the 
power  of  abstinence  that  tools  and  machinery 
are  acquired  by  a  community. ' '  ^ 

The  same  author  tells  us,  that: 

"  Nations  are  progressive  in  proportion  as 
they  possess  the  power  to  save.  In  all  agri 
cultural  communities,  the  harvest  season  is 
the  dissipation  season  of  the  year.  In  some 
communities  this  dissipation  is  not  checked 
until  suffering  ensues.  In  British  India  the 
people  can  hope  for  no  more  in  good  years 
than  to  be  carried  through  into  the  next,  and 
every  four  or  five  years,  a  short  crop  produces 
a  famine,  which  destroys  millions  of  people. 
*  *  *  The  starving  season  was  the  term  ap- 
plied to  a  period  of  two  or  three  months,  pre- 
ceding the  harvest  fifty  years  ago." 

Here  we  have  a  hint  of  the  social  service  of 
capital  in  supplying  a  permanent  store  of 
strength,  and  in  serving  as  an  effective  shield 

1  Political  Economy,  Sections  98  and  94. 


18  SAVINGS    INSTITUTIONS 

against  general  distress.  Strength  and  power 
are  always  conditioned  upon  a  reserve  of 
energy ;  and  this  is  no  less  true  in  the  case  of 
society  than  in  the  case  of  mechanics.  Com- 
munity happiness  is  thus  dependent  upon  the 
degree  of  providence  practiced  by  the  citizens ; 
and  where  the  individuals  alternately  revel 
and  starve,  the  community  has  no  foundation 
on  which  to  build  prosperity. 

It  follows  from  what  has  been  said  that  the 
institution  which  cultivates  the  saving  habit 
may  perform  a  number  of  related  services. 
First,  it  may  cultivate  the  genius  for  a  large 
scale  production,  giving  to  the  community  the 
advantages  of  a  highly  differentiated  manu- 
facture. Secondly,  it  may  provide  the  capital 
for  such  economies ;  and  here  the  fact  should 
be  emphasized  that  a  community  does  not  take 
high  rank  in  general  prosperity  through  the 
capital  obtained  from  the  abstinence  of  one  or 
a  few  individuals,  but  the  capital  of  the  com- 
munity is  the  product  of  a  common  providence. 
Third,  if    the  community  is  not  adapted  to 


THE   THEORY   OF   SAVINGS  19 

large  industries,  or,  if  agriculture  largely  pre- 
dominates, development  of  the  saving  habit 
will  furnish  it  with  well  ordered  lives,  com- 
fortable homes,  and  immunity  from  periodic 
suffering. 

The  most  orthodox  opinion  as  to  the  nature 
of  savings  has  been  followed  in  this  sketch; 
and  the  more  recent  controversies  are  pur- 
posely avoided.  The  exact  processes  and  in- 
cidents of  saving,  about  which  there  has 
recently  been  considerable  discussion,  are  still 
involved  in  complexity  and  mystery.  ^ 

The  more  speculative  line  of  treatment  and 
the  controversies  which  it  has  evoked  are  not 
reviewed  here ;  and  first,  because  the  author 

1  The  reader  is  refen-ed  to  Prof.  Bohm-Bawerk's  work  oa 
The  Positive  Theory  of  Capital  for  a  most  interesting  and  in- 
genious discussion  of  the  processes  involved  in  saving.  And 
for  an  interesting  controversy  involving  generally  accepted 
theories,  he  may  be  referred  to  Mr.  John  M.  Robertson's  little 
book  on  The  Fallacy  of  Saving.  London:  Svran,  Sonnenschein 
.&  Co,;  New  York:  Charles  Scriberner's  Sons,  1893.  And 
also  to  the  brief  article  on  The  Function  of  Saving  by  Mr.  L. 
<T.  Bostedo  in  the  Annals  of  the  American  Academy  of  Poli- 
tical and  Social  Science,  for  Jan.,  1901,  which  is  in  effect  a 
reply  to  Prof.  Bohm-Bawerk,  and  to  the  latter's  rejoinder  un- 
>der  the  same  caption  in  the  same  magazine  for  May,  1901. 


20  SAVINGS    INSTITUTIONS 

doubts  if  the  subtle  speculations,  in  which  the 
Austrian  economists  are  especially  adept,  have 
in  this  connection  more  than  an  academic 
value ;  and,  secondly,  because  the  attacks  upon 
the  accepted  principle  of  saving  are  not  re- 
garded as  more  than  ingenious.  The  fact  that 
capital  grows  out  of  saving,  and  confers  in 
turn  the  power  of  repeating  the  process  upon 
a  larger  scale,  seems  as  clear  as  the  fact  that 
the  standing  grain  has  sprung  from  the  seed 
wheat,  which  has  been  saved  from  the  mill, 
and  in  turn  affords  the  means  for  planting  a 
still  larger  acreage.  The  intermediate  chemi- 
cal processes  involved  in  the  germination  of 
the  seed  grain  need  not  1  )e  understood  in  order 
to  bring  conviction  as  to  the  general  causal 
relation  between  the  phenomena  of  garnering 
the  seed  wheat  and  the  standing  crop.  No 
more  is  it  essential  to  know  all  the  processes 
which  intervene  in  time  between  the  saving 
of  the  produce  and  the  capital  which  has 
sprung  from  this  saving. 

We  are,  however,  concerned  with  the  pro- 


THE   THEORY   OF   SAVINGS  21 

cesses  involved  in  individual  saving,  because, 
cognizance  must  be  taken  of  it  in  the  fashion- 
ing of  saving  institutions,  as  will  appear  in 
the  subsequent  chapters  of  this  work.  But 
fortunately,  the  case  here  is  simple  and  may 
be  easily  elucidated.  It  may  be  easily  under- 
stood by  a  study  of  the  modern  theory  of  in- 
terest, which  takes  note  of  the  universal 
hunger  for  immediate  satisfactions,  or  the 
clamor  of  impulsive  desires.  Some  contrary 
force  must  conquer  this  enemy  in  order  to 
^ '  make  way  ' '  for  capital,  and  in  order  to  give 
economic  strength  to  the  individual.  As  far 
as  the  individual  is  concerned,  his  conception 
of  his  own  personal  happiness  will  determine 
his  course  of  conduct ;  he  has  no  sense  of  be- 
ing the  creator  of  social  capital.  It  is  when 
his  imagination  is  able  to  project  itself  into 
the  future  and  to  indulge  the  larger  enjoy- 
ments, or  to  realize  the  pain  of  deprivation 
which  will  accompany  the  weakening  of  the 
productive  power,  that  there  is  a  force  sufficient 
to  hold  in  check  the  spendthrift  prochvities.  It 


22  SAVINGS    INSTITUTIONS 

is  after  the  more  animal  or  elementary  wants 
have  been  satisfied  that  the  person  is  able  to 
deny  himself  immediate  gratifications  in  order 
to  provide  against  the  decMne  in  productive 
power  or  for  a  more  brilliant  future.     In  order 
to  reahze  either  of  these  purposes,  he  capital- 
izes a  portion  of  his  income.     By  capitahzing 
is  here  meant  investment  in  something  which 
yields  an  income.     The  provident  manufac- 
turer will  invest  in  a  better  or  a  larger  plant. 
The  man  who  receives  a  salary  may  invest  in 
stocks  or  bonds,  in  a  life  insurance  policy,  or 
possibly    in    rentable    property.      The  wage- 
earner  may   invest   his  savings    in   building 
associations  stock  or  in  savings  bank  accounts. 
The  share  of  the  income  which  is  capitalized 
does  not  all  find  its  way  into  the   form   of 
social  capital ;  it  does  not  all  contribute  directly 
to  the  increase  of  the  total  product  of  society. 
This  fact  brings  us  to  the  distinction  between 
individual    and    social    capital.  ^      Individual 

^This  distinction  is  clearly  described  in  Ely's  Outlines  of 
Economics,  Book  II,  Ch.  2. 


THE   THEORY   OF   SAVINGS  23 

capital  contributes  to  the  wellbeing  of  the  in- 
dividual but  it  does  not  necessarily  render 
society  as  a  whole  any  the  richer ;  but  social 
capital  is  designed  to  enrich  both  the  individual 
and  society.  Savings  become  individual  capi- 
tal when  they  are  invested  in  such  forms  as 
notes,  bonds  and  stocks  where  the  money  of 
the  purchaser  does  not  go  into  the  increase  or 
into  the  improvement  of  the  plant  of  the 
company.  They  become  social  capital  only 
when  they  are  turned  into  some  kind  of  prop- 
erty which  yields  an  increase  of  new  goods. 
So  all  savings  do  not  go  to  increase  the  pro- 
ductive power  of  society. 

It  may  even  appear  that  savings  applied  to 
strictly  individual  capital  is  a  hindrance  to  the 
total  productivity,  for  as  personal  effort  begins 
to  be  supplemented  by  income-yielding  capital 
it  is  likely  to  be  relaxed  and  unless  the  stand- 
ard of  hving  is  proportionately  increased  the 
degree  of  this  relaxation  may  be  somewhat 
proportioned  to  the  extent  of  the  capital  in- 
come.    Society  may  find  some  compensation 


2  J:  SAVINGS    INSTITUTIONS 

for  this  in  better  mechanical  processes,  where 
the  saving  is  appUed  to  social  capital,  but  a 
compensating  gain  in  the  case  of  individual 
capital  is  not  so  clear.  An  analysis  of  the 
remote  effects  might  reveal  it  however.  This 
analysis  should  begin  with  the  query  as  to 
what  is  done  with  the  purchase  price  of  the 
individual  capital.  If  it  goes  into  final  con- 
sumption or  ceases  to  be  capital  there  is  no 
compensating  gain  and  in  such  case  society  is 
injured  by  the  saving  of  the  individual.  But 
such  a  use  of  the  proceeds  of  the  sales  of 
notes,  stock,  bonds,  etc.,  must  be  quite  ex- 
ceptional. In  most  instances  the  capital  re- 
leased wiU  seek  further  investment  more  in 
harmony  with  the  situation  and  talents  of  the 
vendor.  The  new  investment  may  also  be  in 
some  form  of  individual  capital,  but  if  the 
record  of  such  transactions  could  be  followed 
to  the  end,  it  is  safe  to  assume  that  in  the 
great  majority  of  cases  a  vendor  would  finally 
be  found  who  would  invest  the  proceeds  of  the 
sale  in  social  capital,  that  is,  in  an  addition  to 


THE   THEORY    OF    SAVINGS  25 

the  present  stock  of  social  capital.  The  sav- 
ing will  certainly  find  such  employment  sooner 
or  later,  where  it  is  not  dissipated,  wasted,  or 
consumed  by  the  way. 

Savings    institutions    minister    to    capital 
building  in  the  following  way:  In  competi- 
tive industries  profits  always  inchne  towards 
a  point,  so  low  that  there  is  no  longer  a  suffi- 
cient incentive  to  continue  in  the  business. 
When  this  point  is  reached  the  capitahst,  if  he 
does  not  retire  from  the  field,  will  seek  an 
advantage  over  his  competitors  through  new 
improvements   in   his   plant, —  improvements 
either  of   a  nature  intended  to  increase  the 
productive  capacity  of   the  estabhshment,  or 
of  a  nature  intended  to  improve  the  quality 
of  the  product.     In  very  many  instances  such 
improvements  are  dependent  upon  the  avail- 
able loan  fund.     An  institution  that  would 
render  the  savings  of  the  masses  always  avail- 
able would  influence  the  loan  fund  in  one  of 
two  ways,  viz :  directly,  through  loans  of  de- 
posits to  industrial  undertakings ;  or  indirectly, 


26  SAVINGS    INSTITUTIONS 

through  the  purchase  of  pubhc  securities,  and 
by  that  means  turning  a  larger  amount  of 
private  funds  into  productive  undertakings. 

Turning  now  from  a  consideration  of  the 
relation  of  savings  to  capital  to  a  consideration 
of  its  relation  to  labor  power,  we  find  that  its 
effects  present  a  two-fold  aspect.  One  per- 
tains to  labor  as  an  impersonal  quantity,  and 
the  other  to  the  psychic  effect  of  self- discipline 
upon  the  individual  when  translated  into 
workmanship. 

The  first  is  well  described  by  McCulloch : 

"  As  an  accumulation  of  capital  must  pre- 
cede any  very  extensive  division  and  combin- 
ation of  employments,  so  their  further  division 
and  combination  can  only  be  perfected  as  capi- 
tal is  more  and  more  accumulated.  Accumu- 
lation and  division  act  and  react  on  each  other. 
The  greater  the  amount  of  their  capital,  the 
better,  speaking  generally,  will  the  employers 
of  labor  distribute  the  work  to  be  done  among 
the  work-people  in  their  employment,  who, 
consequently,  have,  as  already  explained,  a 
greater  chance  of  discovering  machines  and 
processes  for  abridging  their  various  tasks. 
Hence  the  industry  of  every  country  is  not 
only  directly  increased  with  the  increase  of 
the  stock  or  capital  which  sets  it  in  motion; 


THE   THEORY   OF   SAVINGS  27 

but,  by  means  of  this  increase,  the  division  of 
labor  is  extended,  new  and  more  powerful  im- 
plements and  machines  are  invented,  and  the 
same  amount  of  labor  is  made  to  produce  a 
much  greater  supply  of  commodities." 

From  the  point  of  view  of  labor,  as  the  ac- 
tive factor  in  production,  the  fruits  of  saving 
will  be  found  in  the  reaction  of  wholesome 
habits  upon  power  and  skill.  The  practice  of 
self  denial  in  the  form  of  saving  gives  the  per- 
son a  firmer  grip  upon  his  powers,  for  the 
directive  factor — which  is  of  greater  moment 
than  brute  strength  in  all  trades  involving 
skill — obtains  intelligent  control  as  the  clamor 
of  sensual  wants  is  subdued.  When  yielding 
to  the  lower  wants  takes  the  form  of  indulg- 
ence in  stimulants,  the  directive  power  is 
weakened  through  exhaustion  of  nerve  force 
under  conditions  of  abnormal  exhileration. 
The  working  man  who  drinks  excessively  is 
almost  certain  to  be  indolent  and  careless ;  and 
even  when  indulgence  takes  less  vicious  forms 
it  deflects  the  thought  of  the  workman  from 
his  task.     The  lower  wants  are  more  persistent 


28  SAVINGS    INSTITUTIONS 

in  their  appeals  to  the  mind,  either  the  mem- 
ory of  past  gratifications  or  the  anticipation 
of  future  ones  claiming  the  thought  during 
the  working  hours. 

The  saving  habit  on  the  other  hand  may 
have  a  tendency  to  impair  the  quality  of 
workmanship  if  it  extends  to  a  deprivation  of 
the  necessities  of  life  for  the  efficient  work- 
man must  be  well  nourished.  But  against 
this  may  be  urged  the  probabilities  of  gain  in 
physical  well-being  through  the  elimination  of 
harmful  articles  of  luxury.  The  saving  habit 
will  not  extend  much  beyond  the  class  which 
has  some  luxury  to  sacrifice — and  if  the  sac- 
rifices are  confined  to  this  class  of  goods  there 
probably  will  be  a  positive  gain  in  physical 
strength.  It  is  conceded,  however,  that  there 
€an  be  no  positive  assurance  that  the  line  of 
sacrifice  will  always  take  this  desirable  direc- 
tion. It  doubtless  sometimes  happens  that 
saving  is  at  the  epense  of  physical  or  mental 
— strength — just  as  energy  is  sometimes  ex- 
hausted through  a  too  faithful  application  to 


THE   THEORY   OF   SAVINGS  29 

work.  The  balance  of  probabilities,  however, 
must  be  on  the  side  of  improvement  in  pro- 
ductive power. 

The  development  of  the  saving  faculty  in- 
timately concerns  the  economic  weal  of   the 
people  because   it   promises  a   more  healthy 
diffusion  of  wealth.     It  may  give  the  small 
capitalists  greater  resisting  power  against  the 
tendency  to  the  concentration  of  capital — and 
thus  avoid  the  harsh  incidents  of  too  sudden 
changes  in  capital  ownership.     Wage  servants 
may  also  derive  an  immediate  advantage  in 
forcing  an  increase  or  in  preventing  a  fall  in 
wages  through  the  use  of  savings  as  a  strike 
fund,  for  the  knowledge  that  labor  is  supplied 
with  an  emergency  fund  is  calculated  to  make 
employers  concihatory.    More  remotely  it  may 
effect  the  state  of  the  labor  market,  by  check- 
ing the  growth  of   population,  the  postpone- 
ment of  marriage  until  the  ' '  cottage  stand- 
ard "  of  life  can  be  realized  exercising  a  most 
wholesome  check  upon  population,  and  there- 
by relieves  the  tension  of  the  labor  market 


30  SAVINGS    INSTITUTIONS 

through  a  reduction  of  competition  for  wage 
service. 

Saving  may  be  studied  from  the  standpoint 
of  consumption  with  equal  profit.  If  we 
place  the  emphasis  in  economic  study  upon 
that  phase  of  the  science  which  has  to  do  with 
human  well-being,  the  importance  of  a  study 
of  saving  in  its  influence  upon  consumption 
will  be  clear.  It  should  include  both  qualita- 
tive and  quantitative  consumption,  and  the 
bearing  of  saving  upon  each  is  evident.  The  pri- 
mary economic  test  of  human  well-being  con- 
sists in  the  extent  of  one's  command  over  eco- 
nomic goods — whether  this  command  results 
from  labor  power,  intellectual  abilities,  or  own- 
ership of  capital.  Starting  with  personal  abili- 
ties—human well-being  increases  with  their 
growth  and  in  accelerated  degree  when  accom- 
panied by  the  accumulation  of  capital.  When 
the  producer  voluntarily  limits  his  present 
consumption  he  does  it  with  a  view  to  a  larger 
future  consumption.  Saving  thus  promotes 
human  well-being  in  affording  an  increasing 


THE   THEORY   OF    SAVINGS  31 

ability  to  consume  and  in  a  final  increase  in 
the  actual  consumption,  always  provided, 
however,  that  the  savings  are  wisely  invested. 

Within  the  range  of  what  Sir  James  Steuart 
would  call  ' '  physical  necessities  ' '  the  dis- 
criminating sense  may  be  educated.  Beyond 
this  essential  basis  of  well-being  consumption 
might  be  classified  into:  Physical  and  Intel- 
lectual— or  Sensual  and  Cultural.  By  Physi- 
cal or  Sensual  we  mean  some  form  of  luxury 
(which,  if  not  to  be  deprecated,  is  certainly 
to  be  carefully  guarded),  as  certain  forms  of 
indulgence  which  feed  the  animal  passions  and 
tend  to  develop  the  social  type  known  as  a  hon 
vivant — as  opposed  to  the  tyjDe  in  which  the 
craving  for  knowledge,  or  the  religious  or 
social — meliorative  spirit  is  prominent. 

Some  of  the  evils  proceeding  from  luxury 
are  thus  detailed  by  Sir  James  Steuart : 

"  Eating  to  excess  produces  the  inconven- 
ience of  rendering  the  perceptions  dull,  and  of 
making  a  person  unfit  for  study  or  application. 
Drinking  confounds  the  understanding,  and 
often  prevents  our  discovering  the  most  pal- 


32  SAVINGS    INSTITUTIONS 

pable  relations  of  things.  Love  fixes  the  ideas 
too  much  upon  the  same  object,  makes  all  our 
pursuits  and  pleasures  analogous  to  it,  and  con- 
sequently renders  them  trifling  and  superficial. 
Ease,  that  is,  too  great  a  fondness  for  it,  de- 
stroys activity,  damps  our  resolutions,  and 
misleads  the  decisions  of  our  judgment  on 
every  occasion,  when  one  side  of  the  question 
implies  an  obstacle  to  the  enjoyment  of  a 
favorite  indulgence.  The  domestic  incon- 
veniences of  these  four  species  of  luxury  are 
described  as  centering  in  one,  viz :  ' '  the  dissi- 
pation of  fortune,  upon  which  depends  the 
future  ease  of  the  proprietor  and  the  well-being 
of  his  posterity.  Applied  to  persons  who  have 
no  fortune  luxury  tends  to  dissipate  brain 
power,  nerve  force  and  muscular  energy. ' '  ^ 

Yet  this  same  writer  stands  as  the  champion 
of  moderate  luxury  in  consumption.    He  says : 

"  A  sober  man  may  have  a  most  delicate 
table,  as  well  as  a  glutton ;  and  a  virtuous  man 
may  enjoy  the  pleasures  of  love  and  ease  with 
as  much  sensuality  as  Heliogabelus.  But  no 
man  can  become  luxurious  in  one  acceptation 
of  the  word,  without  giving  bread  to  the  indus- 
trious, without  encouraging  emulation,  indus- 
try and  agriculture ;  and  without  producing  the 
circulation  of  an  adequate  equivalent  for  every 
service.  This  last  is  the  palladium  of  liberty, 
the  fountain  of  gentle  dependence,  and  the 
agreeable  bond  of  union  among  free  societies. " 

'  Sir  James  Steuart's  Political  Economy,  B.  11,  Ch.  xx. 


THE   THEORY   OF   SAVINGS  33 

Still  more  extreme  is  the  position  of  Bern- 
hard  Mandeville,  who  places  a  decided  empha- 
sis upon  spending — and  disparages  frugality, 
his  main  thesis  being  ' '  spending  makes  trade 
lively,  while  frugality  causes  industrial  stag- 
nation." 

' '  Honesty,  contentment  and  frugality, ' '  he 
says,  ' '  are  suited  to  an  indolent  society,  but  the 
necessities,  the  vices,  and  the  imperfections  of 
men  are  the  sources  of  all  the  arts,  as  well  as 
of  industry  and  labor.  Extreme  heat  and 
cold,  bad  seasons,  treacherous  waters,  violent 
winds,  and  fire  are  regarded  as  benefits  because 
they  make  men  work  and  keep  trade  Hvely. "  ^ 

This  doctrine  has  no  respectable  support  to- 
day, but  it  has  still  its  defenders.  One  fre- 
quently hears  in  a  western  mining  camp,  or 
in  a  town  in  which  the  spirit  of  speculation  is 
raging,  that  gamblers  and  sporting  men  gen- 
erally are  a  valuable  class  of  citizens  because 
' '  they  spend  freely  and  make  trade  lively. ' ' 

A  strong  antagonist  to  the  spendthrift  phil- 
osophy was  found  in  Adam  Smith — who  calls 

^The  thought  is  worked  out  in  Mandeville's  famous  pamph- 
let "Fable  of  the  Bees"  which  was  published  in  1714. 


34  SAVINGS    INSTITUTIONS 

savings  capital  and  spendings  revenue. 
"  When  capital  predominates  "  he  says,  "  in- 
dustry prevails;  whenever  revenue,  idle- 
ness. ' '  ^  Smith  goes  to  the  other  extreme  of 
a  too  material  conception  of  social  progress; 
and  comes  near  being  involved  in  the  vicious 
circle  of  "  making  to  spend  and  spending  to 
make, ' '  and  he  seems  to  place  all  the  empha- 
sis upon  saving,  and  to  attach  exclusive  im- 
portance to  capital  building,  not  discriminat- 
ing between  wholesome  and  unwholesome 
spending. 

In  fact  social  progress  depends  mainly  upon 
two  things,  viz:  capital  building  and  high 
quality  consumption.  -  Hence  we  are  inter- 
ested in  every  agency  which  tends  to  influence 
or  modify  consumption. 

The  influence  of  saving  upon  the  quality  of 
consumption  is  of   even  greater   significance 

1  Wealth  of  Nations,  Book  IV,  Chap.  viii. 

*Mr.  .John  A.  Hobson  thinks  "It  is  to  improved  quality  and 
character  of  consumption  that  we  can  alone  look  for  a  guar- 
antee of  social  progress."  "Evolution  of  Modern  Capital- 
ism." p.  3G8. 


THE   THEORY   OF   SAVINGS  35 

than  its  influence  upon  the  quantity  of  con- 
sumption. It  tends  at  once  to  bring  the 
higher  forms  of  goods  within  reach  and  to 
cause  the  person  to  appropriate  them.  Com- 
pare, for  example,  the  habits  of  a  man  who 
has  acquired  wealth  through  industry  and 
saving  with  those  of  the  man  who  has  come 
suddenly  into  possession  of  it.  In  the  former 
case  the  diet  is  apt  to  be  wholesome  and  the 
dress  to  be  simple.  Indeed  saving  very  sel- 
dom increases  lines  of  consumption  which 
are  physically  weakening,  and  its  discipline 
neutralizes  the  relish  for  indulgences  which 
unlock  the  animal  nature  and  lead  to  a  weak- 
ening of  mental  and  physical  power.  Fur- 
thermore, an  increase  of  such  strength  reacts 
strongly  upon  the  ethical  character  of  the 
people.  Immediate  wants  are  largely  low  and 
sensual,  and  the  practice  of  abstemiousness 
is  likely  to  result  in  a  diminished  use  of 
whiskey  and  tobacco,  and  in  larger  expendi- 
tures for  character  building  goods. 

This  is  the  point  where  the  question  has 


36  SAVINGS   INSTITUTIONS 

both  an  economic  and  a  social  bearing. 
Economics  has  to  do  with  the  subject  of  the 
consumption  of  wealth  in  its  relation  to  pro- 
duction and  in  its  relation  to  the  individual 
units  of  society.  Sociology  has  to  do  with 
the  influence  of  consumption  upon  social 
problems — and  especially  upon  that  condition 
which  is  commonly  called  degeneracy,  and 
here  it  must  be  noted  that  sources  of  economic 
weakness  are  also  sources  of  social  degeneracy. 
By  economic  weakness  is  here  meant  a  peril 
of  dropping  out  of  the  list  of  economic  per- 
sons and  of  becoming  a  member  of  the  class 
of  non-economic  or  parasytic  persons.  The 
number  of  this  latter  class  in  a  community 
forms  a  fairly  correct  measurement  of  its 
social  weakness,  but  the  remedy  must  be 
applied  in  especial  measure  to  the  economic 
class  next  above  it ;  for  if  not  recruited  from 
above  the  degenerate  class  would  gradually 
become  extinct,  owing  to  its  members'  man- 
ner of  living  and  to  their  inherent  mental  and 
physical  weaknesses.      Eecurring  hard  times 


THE    THEORY    OF   SAVINGS  37 

and  commercial  crises  force  large  numbers  of 
the  weakest  economic  members  of  society  into 
the  ranks  of  the  non-economic  and  thus 
weaken  the  economic  strength  of  the  entire 
wage-earning  class.  The  case  of  a  business 
firm  or  corporation  clearly  illustrates  the  prin- 
ciple of  industrial  survival.  When  competi- 
tion wears  away  the  margin  of  profit  the  sur- 
vival of  the  industry  depends  upon  the 
employment  of  reserved  energy.  The  wit  of 
man  must  in  this  crisis  find  some  means  of 
reorganizing  or  supplementing  existing  ma- 
chinery for  the  cheaper  or  the  finer  production 
of  the  commodity.  The  firm,  or  company, 
therefore,  which  provides  a  reserve  of  energy, 
which  may  be  drawn  upon  in  such  emergencies 
is  in  so  far  fortified  against  industrial  crises, 
and  the  establishment  which  fails  to  make 
such  provision,  which  drawls  continually  up- 
on its  credit  up  to  the  extreme  limit,  is  hkely 
to  succumb  to  the  first  shock.  In  the  case  of 
a  business  firm  or  corporation,  the  reserve  of 
energy  usually  consists  of  credit  rather  than 


38  SAVINGS    INSTITUTIONS 

money ;  and  the  provident  institution  is  care- 
ful of  its  credit ;  the  assets  will  always  make 
a  good  showing  alongside  of  the  liabihties,  for 
industrial  survival  in  times  of  distress  re- 
quires a  generous  margin  of  credit.  Upon 
this  reserve  depends  the  power  of  the  firm  to 
avail  itself  of  new  inventions  and  new  ma- 
chinery, to  keep  up  with  the  even  course  of 
events — and  it  is  a  veritable  life  preserver  in 
times  when  competition  has  cut  profits  to  the 
quick.  And  even  more  clearly  may  the  prin- 
ciple be  illustrated  in  the  case  of  a  banking 
institution  because  here  the  reserve  is  regis- 
tered in  terms  of  cash.  The  pubhc  is  advised 
of  the  eduring  power  of  the  bank  by  the  per- 
centage of  its  assets  which  are  kept  in  the 
form  of  a  cash  reserve  or  of  such  gilt-edged 
securities  as  can  be  readily  converted  into 
cash;  lust  of  dividends  will  eat  into  this  re- 
serve at  the  peril  of  the  institution's  standing 
in  the  community ;  and  a  regular  compliance 
with  the  principles  of  a  safe  reserve  is  a  fair 
test  of  its  resisting  power. 


THE   THEORY   OF   SAVINGS  39 

The  more  opulent  persons  and  institutions 
attain  their  positions  and  retain  them  by  the 
practice  of  jealously  guarding  a  reserve  of 
economic  strength.  But  how  does  the  prin- 
ciple apply  to  the  case  of  the  person  who 
owns  no  capital — who  has  only  his  compensa- 
tion for  his  services — his  salary  or  his  wages  ? 

This  is  the  vulnerable  point  in  society ;  here 
a  failure  of  the  spring  of  supply  is  likely  to 
create  the  most  utter  demoralization.  A  fail- 
ure of  income  at  this  point,  where  there  is  no 
reserve  of  energy  is  apt  to  lower  character, 
and  it  almost  surely  produces  some  form  of 
demoralization.  In  the  case  of  the  failure  of 
a  prominent  business  man  there  is  usually  an 
amount  of  wreckage  to  soften  the  fall.  He 
may  be  protected  from  want  by  the  property 
of  his  wife  or  by  her  dower  interest  in  his 
real  estate.  He  has  usually  the  sympathy  of 
influential  friends  who  may  find  for  him  an 
opportunity  to  earn  a  living ;  and  his  business 
experience  is  likely  to  make  his  services  valu- 
able on  their  merits.     Social  evils  flow  chiefly 


40  SAVINGS    INSTITUTIONS 

from  the  distress  of  the  men  at  the  bottom  of 
the  economic  scale,  men  who  have  no  influ- 
ential friends,  and  for  whom  there  are  no  sub- 
ordinate positions  to  fall  into.  Both  from  an 
individual  and  a  social  point  of  view  it  is  most 
essential  that  the  doctrine  of  a  reserve  of 
energy  find  an  abiding  place  in  this  class. 

So  it  will  be  seen  that  our  subject  has  both 
an  economic  and  a  social  bearing,  and  its  im- 
portance is  witnessed  by  such  phenomena  as 
commercial  distresses  incident  to  loss  of  em- 
ployment, backward  and  famine-cursed  com- 
munities and  peoples,  vicious  consumption, 
and  a  continually  recruited  dependent  class. 
We  have  perhaps  developed  each  of  these 
phases  sufficiently  far  to  show  that  as  many 
distinct  lines  of  treatment  might  be  ex- 
tensively developed  as  the  phenomena  just 
noted,  and  this  makes  it  essential  that  a  selec- 
tion be  made.  Hereafter  the  point  of  view 
will  be  that  of  the  well-being  of  the  laborer 
rather  than  that  of    the  capitalist;    and  the 


THE   THEORY   OF   S^iVINGS  41 

well-being  of  the  individual  rather  than  that 
of  society  as  a  whole,  although  it  is  well  recog- 
nized that  in  neither  case  can  a  sharp  distinc- 
tion be  made. 


CHAPTER    II 

THE   EDUCATIOXAL    ASPECTS    OF   SAVING^ 

In  the  modern  trend  of  thought  towards 
social  mehorism  there  lurks  a  danger  of  im- 
practical transcendentalism.  An  abounding 
faith  in  the  unfolding  potentiahties  of  the 
human  kind — where  adequate  room  is  afforded 
— is  always  in  danger  of  developing  an  ultra- 
rational  programme.  The  faith  in  humanity 
which  may  be  relied  upon  to  remove  moun- 
tains of  social  ills  is  that  which  recognizes 
both  its  unfolding  capacity  and  its  limitations. 

The  modern  winged  optimism  has  very  consid- 
erably influenced  economic  thinking  and  writ- 
ing, even  exceeding  a  mere  change  of  emphasis. 
For  example,  it  has  become  fashionable  to 
ridicule  the  ' '  economic  man  ' ' ;  that  is,  the 
ideal  man   who  is  always  amenable  to  eco- 

1  This  chapter  is  reprinted  by  permission  from  the  Quarterly 
Journal  of  Economics  for  October,  1898. 

(42) 


EDUCATIONAL   ASPECTS   OF   SAVING  43 

nomic  forces.  It  has  also  become  fashionable 
to  treat  the  Ricardian  theory  of  wages  with  a 
superior  contempt,  and  to  refer  to  it  as  an 
exploded  doctrine,  the  "  normal  "  or  "  sub- 
sistence minimum  "  wage  being  treated  as  a 
phantom  of  the  imagination, — the  ghost  of 
an  ingenious  theory  which  was  never  em- 
bodied in  reality.  The  Malthusian  doctrine 
of  population  has  come  into  such  bad  favor 
as  almost  to  amount  to  a  renaissance  of  God- 
win and  Condorcet  Utopianism.  Following 
in  this  general  trend  away  from  the  ground 
occupied  by  the  classical  economists,  Adam 
Smith's  deification  of  the  laws  of  competition 
has  been  succeeded  by  an  equally  blind  hostil- 
ity. 

Admitting  the  extremes  to  which  these  old 
landmark  doctrines  were  carried,  and  recog- 
nizing the  harmf  ulness  of  such  doctrinal  ideal- 
ity, it  may  be  a  question  if  the  extreme  reac- 
tion is  not  the  most  vicious  fruit  they  have 
borne.  It  seems,  at  least  to  the  writer,  that 
the  neglect  of  the  essential  truths  of  these  old 


44  SAVINGS    INSTITUTIONS 

doctrines  is  calculated  to  sap  the  strength 
both  from  theoretical  and  institutional  econo- 
mics. It  tends  to  substitute  for  the  science 
of  economics  a  sort  of  Utopian  mehorism. 
The  advent  of  the  melioristic  spirit  is  oppor- 
tune, and  the  present  epoch  otfers  it  a  very 
large  world  to  conquer;  but  a  successful 
meliorism  needs  most  of  all  to  be  well  bal- 
lasted with  some  of  the  principles  which  are 
now  passing  out  of  favor. 

The  idea  of  the  antiquation  or  explosion  of 
well-matured  principles  should  not  be  allowed 
to  pass  unchallenged.  The  notion  that  great 
thinkers,  like  Smith,  Malthus,  and  Eicardo, 
serve  only  their  own  day  and  generation,  is 
both  unscientific  and  unhistorical.  Doctrines 
in  economics  are  peculiarly  ill  fitted  for  revolu- 
tionary abandonment,  and  such  a  treatment 
of  them  would  necessarily  be  attended  by 
great  disasters.  Economic  theories,  like  doc- 
trines of  law,  are  in  a  sense  immortal.  They 
are  not  abandoned,  but  modified  and  adapted 
to  changing  conditions.     It  may  even  be  said 


EDUCATIONAL   ASPECTS   OF   SAVING  45 

that  well-established  doctrines  are  but  seldom 
exploded.  A  capricious  notion  may  be  ex- 
ploded before  it  has  fairly  taken  root  in  the 
thought  of  men,  but  well-rooted  doctrines  are 
seldom  destroyed  by  the  dynamite  process. 
It  may  also  be  said  that  the  well-rooted  doc- 
trines seldom  fail  to  be  of  service,  both  in  the 
day  of  their  birth  and  in  succeeding  genera- 
tions, even  though  they  may  completely  meta- 
morphose their  character. 

There  is  certainly  still  a  service  for  the  more 
important  doctrines  of  the  classical  econo- 
mists. It  may  not  be  going  too  far  to  say 
that  to  neglect  them  is  to  neglect  the  founda- 
tions of  social  progress.  Some  of  them  are 
fundamentally  essential  to  the  strength  of 
economic  thought,  to  a  proper  shaping  of  the 
growth  of  the  state  through  legislation,  and 
to  the  development  of  the  best  schemes  for 
the  education  of  the  individual  citizen.  The 
''  economic  man  "  does  not  stand  for  the  whole 
of  any  individual  man,  but  he  represents  a 
phase  of   the  nature  of  every  normal  man. 


46  SAVINGS    INSTITUTIONS 

Other  sentiments  and  motives  than  the  eco- 
nomic control  or  modify  the  actions  of  men. 
But  to  leave  out  of  account  the  goad  of  unsat- 
isfied economic  wants,  to  leave  out  of  account 
the  motives  of  acquisitiveness,  and  to  leave 
out  of  account  the  social  and  industrial  ser- 
vices rendered  by  these  forces  is  to  neglect  the 
most  elementary  phenomena  of  human  life. 

Competition  never  possessed  the  social  and 
industrial  potentialities  claimed  for  it  by 
Adam  Smith.  The  formulation  of  his  claims 
for  competition,  however,  impressed  the  pub- 
lic consciousness  with  its  essential  truths  and 
created  conditions  for  its  salutary  application ; 
and  the  industrial  revolution  can  perhaps  best 
be  studied  with  the  Wealth  of  Nations  as  a 
starting-point. 

Similarly,  to  leave  out  of  account  the  ten- 
dency of  the  stream  of  population  to  overflow 
its  banks — for  people  to  increase  in  number 
more  rapidly  than  nature  can  respond  to  their 
physical  needs — is  to  [neglect  a  force  with 
which   almost  all  meliorative  schemes  must 


EDUCATIONAL   ASPECTS   OF   SAVING  47 

reckon.  Directly  correlated  to  the  Malthusian 
law  of  population  is  Ricardo's  theory  of  a 
minimum  of  subsistance  wage.  The  force  of 
an  increasing  population,  according  to  it,  al- 
ways tends  to  glut  the  labor  market  and  drive 
wages  to  that  standard  of  living  where  labor 
may  precariously  subsist  and  hold  its  own; 
not  so  precariously  as  to  cause  a  deterioration 
in  numbers  nor  so  securely  as  to  allow  any 
increase  in  its  number.  Another  downward- 
impelling  force,  similar  in  its  effects  to  that 
with  which  Ricardo's  name  is  associated,  is 
the  introduction  of  labor-displacing  machinery. 
The  two  forces  are  identical  in  their  effect  up- 
on labor,  in  that  they  both  intensify  the  com- 
petition for  wage  service, — the  one  by  increas- 
ing the  number  of  applicants  for  positions,  and 
the  other  by  diminishing  the  number  of  posi- 
tions. The  forcing-downward  tendency  has 
been  arrested  by  the  play  of  other  forces,  but 
it  has  never  been  resisted  without  a  struggle. 
If  the  contest  is  to  continue  to  be  successful, 
it  is  all-important  that  the  initial   force    be 


48  SAVINGS    INSTITUTIONS 

kept  distinctly  in  mind.  We  seem  in  no  way 
of  escaping  from  the  following  order  of  se- 
quences ;  a  tendency  to  early  marriages  and 
large  families ;  a  keener  competition  for  wage 
service;  a  lower  standard  of  living,  sufiering 
and  misery.  Nor  are  we  likely  for  a  long 
time  to  be  rid  of  the  same  distresses  resulting 
from  the  introduction  of  labor-saving  ma- 
chinery. Neither  is  this  order  by  any  means 
universally  defeated.  Hence  it  is  all-impor- 
tant that  meliorative  schemes  take  the  first 
cause  —  early  and  inconsiderate  marriages — 
sternly  into  account.  If  this  root  cause  can 
be  avoided,  the  other  evils  will  at  least  be 
mitigated.  This  is  the  great  problem  of 
education. 

The  surest  way  to  stem  the  stream  of  social 
and  industrial  ills  is  to  stimulate  aspirations 
for  a  high  degree  of  comfort, — for  a  high 
standard  of  Uving, — and  to  formulate  a  con- 
crete, intelligible  scheme  for  its  attainment. 
A  recognition  of  this  need  will  suggest  prac- 
tical lines  of  educational  work. 


EDUCATIONAL  ASPECTS   OF   SAVING  49 

We  speak  of  education  preparing  children 
for  the  battles  of  life.  If  they  are  really  to 
be  prepared  for  the  battles  of  life,  their  edu- 
cation should  both  instruct  them  as  to  the 
character  of  life's  battles  and  fortify  them  with 
definite  schemes  against  their  reverses.  Here 
the  ' '  economic  man ' '  serves  very  well  as  a 
basis  for  mapping  out  educational  programmes. 
By  a  careful  study  of  this  manikin,  the  weak 
points  in  the  real  man  may  be  definitely 
located,  and  an  effective  treatment  may  be 
devised. 

Many  of  our  meliorative  schemes  are  likely 
to  prove  Utopian  in  the  place  where  their 
exploiters  have  left  them.  The  present  meli- 
orative movement  might  be  described  as  a 
demand  for  larger  opportunities  for  individual 
development,  with  proper  developmental  facili- 
ties. The  two  sides  to  the  programme  are: 
more  leisure  time  on  the  one  hand,  and  induce- 
ments to  healthful  employment  of  that  leisure 
on  the  other.  The  facilities  which  are  ex- 
pected to  induce  a  healthful  use  of  the  greater 


50  SAVINGS    INSTITUTIONS 

leisure  include  such  agencies  as  free  public 
libraries,  free  art  collections,  free  public  lec- 
tures, ample  park  and  garden  facilities,  and, 
perhaps,  free  public  concerts  and  operas. 

These  culture  influences,  to  be  provided 
either  by  the  public  economy  or  by  private 
philanthropy  for  the  use  of  the  public,  are 
expected  to  react  upon  the  domestic  economy. 
They  are  expected  to  create  a  hunger  and 
thirst  for  culture,  which  will  transform  the 
home.  Such  schemes  are  Utopian  in  the 
place  where  they  are  left,  because  they  offer 
wings — that  is,  imagination — where  strong 
legs — that  is,  practical  methods — are  needed. 

The  individualizing  process  at  which  educa- 
tion aims  consists  not  in  beholding  the  culture 
material  out  of  which  individual  character 
may  be  wrought,  but  it  consists  in  developing 
a  capacity  to  appropriate  and  use  that  material 
by  the  individual.  Here  we  locate  the  eco- 
nomic basis  of  culture. 

In  this  day  the  individual  discovers  himself 
and  realizes  himself  in  the  lines  of  expendi- 


EDUCATIONAL   ASPECTS   OP   SAVING  51 

ture.  Productive  processes  are  becoming 
more  and  more  deindividualizing,  and,  there- 
fore, non-cultural;  social  progress  demands 
that  the  expenditure  of  income  be  as  individu- 
alizing as  possible.  The  last-century  artisan 
unfolded  his  character  in  the  quality  and  the 
quantity  of  his  work.  The  nineteenth  and 
the  twentiety  century  artisan  must  unfold  his 
character  in  the  way  in  which  he  spends  his 
money.  The  person  becomes  individual  and 
economically  strong  as  he  comes  to  appropri- 
ate culture  for  his  private  use.  As  culture 
creates  a  strong  demand  for  the  things  which 
call  out  the  individual  from  the  mass,  it  tends 
to  defeat  the  Malthusian  law  of  population 
and  to  set  at  naught  the  Ricardian  law  of 
wages.  If  picture  galleries  are  to  raise  the 
standard  of  living,  they  must  influence  the 
individual  expenditure  of  the  artisan.  It  need 
not  be  in  creating  a  demand  for  pictures  in 
the  home,  but  it  must  create  a  sense  of  the 
aesthetic  which  will  be  reflected  in  the  archi- 
tecture and  furnishings  of  the  home,  or  in  the 


52  SAVINGS    INSTITUTIONS 

dress  of  the  family,  or  in  the  flowers  in  the 
garden.  The  sense  of  the  beautiful  may  find 
expression  in  large  or  small  groups  of  expendi- 
ture, but  the  success  of  the  culture  institutions 
must  be  tested  by  such  expenditures.  The 
present  thesis  is  that  the  love  of  the  beautiful 
must  not  find  its  complete  satisfaction  in  the 
facilities  provided  for  the  use  of  the  pubhc. 
Otherwise  the  object  is  not  gained:  the  indi- 
vidual will  less  frequently,  and  with  greater 
difficulty,  emerge  from  the  mass.  It  will  be 
more  difficult  than  ever  for  the  economic  in- 
dividual to  emerge. 

Public  or  municipal  ownership  of  cultural 
property  is  sometimes  called  a  form  of  co- 
operation. The  people  agree  to  purchase  and 
use  pictures  and  books  in  common,  or  provide 
music  and  the  drama  in  common,  or  provide 
educational  facilities  on  the  co-operative  plan, 
— on  the  principle  that  they  secure  a  better 
service  in  that  way.  It  is  an  idea  which  is 
taking  deep  root,  and  promises  a  thrifty 
growth  in  the  future.     It  must  be  noted,  how- 


EDUCATIONAL   ASPECTS   OF   SAVING  53 

ever,  that,  in  so  far  as  dependence  for  culture 
influences  turns  from  the  home  to  the  city, 
the  economic  individual  has  been  drained  of 
his  strength.  The  capacity  of  the  city  through 
such  agencies  to  lift  the  people  to  a  higher 
plane  consists,  not  in  satisfying  desires,  but  in 
quickening  desires  which  the  individual  him- 
self must  find  means  to  satisfy.  The  sum 
total  of  human  happiness  may  be  increased 
for  the  time  by  municipal  provision  for  the 
satisfaction  of  wants ;  but,  if  that  is  the  end, 
it  will  result  in  weakening  the  power  of  the 
individual  by  neglecting  the  standard  of  home 
comforts.  It  can  hardly  be  said  that  the 
priceless  art  treasures  of  Italy,  which  belong 
to  the  people,  bring  them  to  a  higher  plane  of 
living.  The  highest  art  and  the  most  wretched 
squalor  are  the  closest  neighbors. 

In  proportion  as  the  city  satisfies  wants, 
may  it  be  said  to  open  the  way  for  the  baleful 
operation  of  the  Malthusian  law  of  population 
aud  for  the  operation  of  the  Ricardian  law  of 
wages.     Thus  the  city,  in  attempting  to  build 


54  SAVINGS    INSTITUTIONS 

up  the  culture  of  the  community,  may  uuder- 
mine  the  power  of  the  individual  to  realize 
himself,  and  thus  defeat  the  chief  end  of  cul- 
ture. There  is  no  quarrel  here  with  municipal 
patronage  of  culture.  It  is  simply  sought  to 
indicate  a  danger  from  such  a  policy  if  certain 
economic  forces,  long  ago  discovered  and  still 
operative,  are  ignored.  Against  this  danger  it 
is  the  province  of  education  to  provide,  and 
this  brings  us  to  a  more  detailed  discussion  of 
the  economic  functions  of  education. 

A  capacity  to  appropriate  the  better  things 
of  life  is  the  test  of  economic  strength.  This 
capacity  is  likewise  a  test  of  the  adaptiveness 
of  a  people  to  a  meUorative  scheme.  Schemes 
for  elevating  the  masses  may  fail  utterly  of 
their  purpose  unless  there  has  been  a  previous 
development  of  character  which  is  capable  of 
wisely  using  the  opportunitis  made  available. 
An  eight-hour  law,  for  instance,  might  prove 
the  ruin  of  a  people  unless  there  had  been  an 
adequate  growth  in  moral  restraint. 

Therefore,  we  turn  to  education  as  essential 


EDUCATIONAL   ASPECTS   OF   SAVING  55 

to  any  solution  of  industrial  problems.  Illit- 
eracy is  an  insuperable  impediment  to  in- 
dustrial reform.  It  is  the  general  discipline 
and  self-restraint  imposed  by  the  school-room 
which  makes  the  citizen  amenable  to  the  cor- 
rection of  public  opinion  and  which  makes  the 
workingman  frugal  and  industrious. 

Passing  from  this  general  truth  to  a  closer 
analysis  of  the  things  which  education  has  to 
overcome,  we  find  chief  among  these  the  de- 
sire to  satisfy  immediate  wants.  The  impulse 
to  satisfy  the  wants  which  have  to  do  with 
the  physical  senses  is  universal.  The  persons 
who  yield  to  these  desires — the  gluttons,  the 
drunkards,  the  prostitutes,  the  classes  whom 
we  call  degenerates — have  simply  gravitated 
in  the  direction  of  their  primary  sensual  ap- 
petites. An  uncurbed  appetite  for  sugar  and 
sweetmeats  belongs  to  the  same  class  of  phe- 
nomena as  an  uncontrollable  appetite  for 
drink.  Merely  physical  impulses  are  in  con- 
trol in  both  cases,  the  demands  of  the  body 
keeping  the   higher  parts   in   abeyance.      A 


56  SAVINGS    INSTITUTIONS 

rational  discipline  is  essential  to  elevate  the 
race  out  of  this  sensual  state.  An  undisci- 
pUned  and  illiterate  people  is  apt  to  be  a  licen- 
tious people.  Education  stands  between  the 
undeveloped  child  and  such  a  fate.  Educa- 
tion here  may  not  mean  a  school  traning  in 
the  case  of  every  individual,  but  some  sort  of 
kindred  discipline  is  essential  to  a  control  of 
natural  appetites;  and  in  the  extent  of  this 
control  we  have  all  the  difference  between  a 
cultured  and  a  savage  people. 

The  general  stages  of  educational  discipline 
may  be  described  as  follows : — 

First.  Compulsory  discipline  without  rea- 
son or  explanation.  The  child  first  starts  to 
school  because  it  is  sent,  and  it  goes  willingly 
because  other  children  of  the  same  age  are 
going.  The  power  of  imitation  is  usually  a 
sufficient  impelling  force.  Children  concen- 
trate their  minds  and  accomplish  their  tasks 
in  spite  of  the  universal  inchnation  to  run 
wild  in  the  woods,  because  other  children  are 
doing  the  same  thing;  and  this  favorable  en- 


EDUCATIONAL   ASPECTS   OF   SAVING  57 

vironment  is  created  by  the  suggestions  of  the 
teacher  and  parents.  Extra  diUgence  is  in- 
duced by  the  hope  of  praise  for  work  well 
done.  There  is  no  reason  involved  in  any  of 
the  processes. 

Second.  In  the  second  stage  there  is  also 
no  reason  involved,  but  a  new  impulsive  ele- 
ment has  been  evolved.  At  first  there  was  no 
pleasure  in  the  act  of  studying.  It  was  a 
painful  process,  endured  by  force  of  example 
and  for  the  reward  of  praise.  After  the  dis- 
cipline has  continued  sufficiently  long,  it  ceases 
to  be  painful.  In  time  the  act  of  studying, 
of  solving  problems,  of  mastering  the  diffi- 
culties of  penmanship,  of  learning  to  use  the 
voice  properly  in  reading  and  speaking  or  of 
learning  new  facts  in  science  and  history,  be- 
come pleasures  in  themselves.  The  mind  has 
developed  a  faculty  for  overcoming  difficulties, 
and  mental  triumphs  bring  a  joyous  sense  of 
exhilaration  and  a  thrill  of  happiness.  To  the 
primary  impelling  forces  an  attractive  force  of 
great  intensity  has  been  added. 


58  SAVINGS    INSTITUTIONS 

Third.  The  third  stage  brings  the  pupil  to 
a  sense  of  general  order  and  harmony  which 
might  be  described  as  respectability.  Educa- 
tion has  made  a  good  citizen  because  it  has 
evolved  a  sensitiveness  to  order,  because 
senses  have  been  quickened  which  would  be 
shocked  by  excessive  or  indecent  indulgences 
of  physical  wants.  At  this  point  we  note  the 
union  between  the  economic  and  the  moral,  or 
we  find  the  economic  serving  as  the  hand- 
maiden of  the  moral.  The  demand  for  order 
and  harmony  includes  obedience  to  the  ac- 
cepted laws  and  canons  of  righteous  living  as 
prescribed  by  the  best  tone  of  the  community. 

In  order  to  realize  order,  to  experience  har- 
monious living,  certain  economic  auxiliaries 
must  be  realized.  The  sense  of  order  which 
makes  for  respectability  will  despise  the  hovel, 
or  tolerate  it  only  until  a  more  pleasing  habita- 
tion can  be  realized.  This  sense  of  order 
which  makes  for  respectability  will  abhor  the 
ragged  coat  and  the  shoes  run  down  at  the 
heel.     A  person  thoroughly  imbued  with  the 


EDUCATIONAL   ASPECTS   OF   SAVING  59 

sense  of  order  and  harmony  will  chafe  and  be 
miserable  in  an  unsightly  garb.  The  sense  of 
order  which  makes  for  respectability  will  never 
be  satisfied  with  the  pictures  and  ornaments 
which  have  been  brought  into  the  home  until 
the  highest  reaches  of  art  have  been  touched. 

Thus  the  sense  of  order,  of  harmony,  as  it 
grows  in  the  individual,  makes  ever-heavier 
drafts  upon  the  economic  resources.  The 
reahzation  of  order  and  harmony  calls  for 
greater  industry  and  larger  sacrifices  of  im- 
mediate sensual  desires. 

This  sense  of  order  has  its  positive  and  its 
negative  side.  On  its  negative  side  we  observe 
the  things  which  shock  the  sense  of  proper 
conduct,  such  as  vulgar  displays  of  temper  or 
conduct  which  outrages  the  rehgious  sense. 
On  the  positive  side  we  note  the  ambition  to 
acquire  those  things  which  cater  both  to 
physical  comfort  and  to  the  sense  of  the 
beautiful.  It  is  this  side  which  puts  the  eco- 
nomic activities  into  motion,  which  inspires  ta 
industry,  thrift,  and  economy. 


60  SAVINGS    INSTITUTIONS 

The  desire  for  greater  comfort  and  objects 
of  art  is  often  abortive  for  want  of  a  suffi- 
cient concreteness  in  educational  methods. 
The  desire  of  these  things  is  felt,  but  the  in- 
tellect has  not  grasped  any  clear  and  definitely 
formulated  scheme  for  attaining  them.  Their 
attainment  demands  providence.  Providence 
means  a  power  of  sacrificing  a  multitude  of 
immediate  wants,  which  are  ever  clamoring 
for  all  of  one's  income.  Economic  strength 
consists  in  the  power  to  subdue  these  small 
wants,  in  order  to  realize  more  remote  but 
greater  satisfactions. 

An  ideal  educational  system  will  not  only 
kindle  a  passion  for  order:  it  will  formulate 
different  rules,  and  provide  institutions  ex- 
pressly designed  to  facilitate  the  reahzation  of 
order.  Perhaps  the  most  unfortunate  and  un- 
happy creature  in  the  world  is  the  man  who 
has  longings  for  order,  but  lacks  the  capacity 
to  gratify  his  longings.  The  person  who 
has  implanted  within  him  the  love  of  the 
beautiful,  but  who  has  no  power  of  appropri- 


EDUCATIONAL   ASPECTS   OF   SAVING  61 

ating  beautiful  things  for  himself,  is  a  half- 
finished  product  of  education.  Such  a  man  is 
pitifully  weak  and  incomplete.  The  existence 
of  many  people  of  this  type  is  proof  of  the 
incompleteness  of  our  educational  systems. 
These  systems  might  be  called  brutally  inade- 
quate to  human  needs,  in  so  far  as  they  kindle 
proper  desires  without  building  the  character 
for  their  satisfaction. 

The  two  things  essential  to  economic  self- 
realization  are  making  and  saving.  Lessons 
in  making  are  more  likely  to  be  taught  out- 
side of  school,  but  not  so  lessons  in  saving.  A 
completed  educational  system  will  both  inspire 
the  pupil  with  a  love  of  good  things,  and 
teach  him  how  to  obtain  them  through  saving. 

The  savings-bank,  when  properly  organized, 
is  an  educational  rather  than  an  economic  in- 
stitution. Although  it  furnishes  a  safe  place 
for  the  deposit  of  wages  and  small  earnings 
and  pays  an  interest  to  depositors,  its  chief 
design  is  to  teach  the  art  of  saving.  Since  it 
represents  a  phase  of  education  which  is  not 


62  SAVINGS    INSTITUTIONS 

amenable  to  compulsory  methods,  it  must 
seek  to  reach  a  maximum  of  attractiveness. 
With  this  object  in  view  the  factors  determin- 
ing the  success  of  a  savings  system  are  security 
of  deposits,  earning  capacity  of  deposits,  and 
locality  of  depositories. 

The  first  requisite  of  success  is  perfect 
security  of  deposits.  Insistence  upon  absolute 
security  of  deposits  might  be  criticised  as  a 
hot-house  method, — as  forcing  a  growth  which 
cannot  endure  the  variations  in  the  outside 
atmosphere.  It  might  be  said  that  the  in- 
security of  temporal  things  is  a  fact  which 
should  be  impressed  upon  the  minds  of  every 
one ;  and  it  might  be  urged  that  implicit  reli- 
ance upon  an  institution  or  upon  a  person 
tends  to  foster  a  spirit  of  dependence,  and 
induces  a  helplessness  to  cope  with  the  world. 
Against  this  it  might  be  urged  that  it  is  the 
province  of  organized  society  to  eliminate  the 
elements  of  insecurity  in  so  far  as  practicable. 
In  lines  of  education  the  hot-house  method 
can  never  be  wholly  discarded.     Keliance  up- 


EDUCATIONAL   ASPECTS   OF   SAVING  63 

on  the  master  and  upon  the  educational  insti- 
tution are  essential  to  the  success  of  any  edu- 
cational scheme.  In  teaching  lessons  in  sav- 
ing, therefore,  as  great  care  should  be  exer- 
cised in  providing  a  confidence- deserving  sav- 
ings institution  as  would  be  exercised  in 
selecting  a  master  with  an  education  and 
equipment  deserving  of  the  confidence  of  the 
pupil.  In  view  of  the  many  grown  people 
who  are  still  children  in  the  matter  of  spend- 
ing their  money,  it  is  clear  that  they  should 
receive  every  encouragement  which  a  sense 
of  perfect  security  will  give. 

As  to  the  earning  power  of  the  deposits,  the 
rule  should  be  laid  down  that  the  deposits 
should  be  made  to  earn  as  large  an  interest 
sum  as  would  be  consistent  with  reasonable 
security.  This  point  is  not  always  insisted 
upon  by  advocates  of  the  savings-banks  as  a 
part  of  an  educational  scheme.  It  seems  a 
great  mistake.  In  proportion  as  the  saving 
power  is  weak,  should  the  pecuniary  induce- 
ment to  save  be  high.     The  very  weak  saver 


64  SAVINGS    INSTITUTIONS 

is  not  induced  to  save  in  order  to  finally  spend 
for  a  different  class  of  goods.  He  does  not 
classify  his  expenditures,  but  he  has  an  ill- 
defined  sense  of  few  or  many  gross  satisfac- 
tions. The  greater  amount  of  satisfactions, 
according  to  his  present  estimate  of  satisfac- 
tions, is  the  telling  argument.  He  will  reason 
that  it  is  as  well  to  spend  your  money  as  it 
comes  in,  and  be  sure  of  your  enjoyments,  as 
to  practise  self-denial  for  a  period,  and  to  have 
no  greater  satisfaction  at  the  end  than  the  sum 
of  the  enjoyments  which  he  might  have  been 
having  all  the  time.  He  might  reason  that  it 
would  even  be  better  to  spend  as  you  go,  be- 
cause such  a  policy  would  save  the  pain  in- 
volved in  self-denial.  There  must  be  an 
appreciable  addition  to  the  sum  of  satisfac- 
tions in  the  hope  of  the  weak  saver,  to  induce 
him  to  sacrifice  present  wants.  The  greater 
this  addition,  the  greater  the  success  of  the 
scheme.  If  the  bank  deposits  could  be  made 
to  earn  for  the  depositor  an  interest  rate  of 
1  u  per  cent,  it  would  be  more  than  four  times 


EDUCATIONAL   ASPECTS   OF   SAVING  65 

as  effective  an  educator  as  a  3  per  cent  rate. 
An  extraordinary  stimulant  is  required  where 
the  saving  power  is  very  weak. 

Ideas  current  in  America  about  legitimate 
investments  of  postal-saviugs  deposits  are 
liable  partially  to  defeat  the  main  object  of  the 
institution.  Postal  savings  is  itself  a  phase 
of  state  activity  which  impinges  upon  in- 
herited prejudices  as  to  the  legitimate  func- 
tions of  the  state.  It  could  hardly  find  ac- 
ceptance in  America,  except  as  an  educational 
scheme.  Great  fear  is  entertained  lest  the 
government,  in  order  to  carry  out  the  scheme, 
will  have  to  do  more  or  less  of  a  banking, 
or  money-lending,  business.  The  ghost  of 
laissez  faire  is  greatly  frightened  at  such  a 
prospect.  Hence  there  has  sprung  up  in 
anticipation  of  the  postal  savings-bank  an 
incipient  doctrine  as  to  legitimate  and  illegiti- 
mate investment  of  funds  held  in  trust  by  the 
government.  This  incipient  doctrine  proscribes 
investments  in  personal  or  real  estate  securi- 
ties,  and  prescribes    government    and    state 


66  SAVINGS    INSTITUTIONS 

securities.  The  idea  that  a  state  sa^dngs  sys- 
tem should  deal  only  in  state  or  other  public 
securities  will,  if  it  prevails,  keep  the  earn- 
ings of  deposits  below  3  per  cent,  while  in 
America  the  rate  should  be  4  or  5  per  cent. 
One  could  wish  in  the  interest  of  social  and 
industrial  reform  that  so  much  of  the  old  idea 
of  the  Physiocrats  as  to  the  legitimate  sphere 
of  state  activity  had  not  survived.  A  more 
hopeful  doctrine  might  be  borrowed  from  the 
practice  of  courts  in  interpreting  statutes, — 
that  the  power  of  the  courts  to  use  whatever 
means  may  be  necessary  to  make  the  law  fully 
effective  is  assumed.  The  effectiveness  of  a 
reform  measure  should  not  be  hampered  by 
any  doctrines  as  to  the  legitimate  sphere  of 
state  activity.  The  adoption  of  a  reform 
measure  by  the  state  should  be  the  single 
issue ;  and,  that  settled,  every  provision  should 
be  made  looking  to  its  complete  success.  The 
first  battle  won,  there  should  be  no  further 
hostages  to  laissez  faire.  This  is  the  logical 
position,   and  it  would  be  the  best  fighting 


EDUCATIONAL   ASPECTS    OF   SAVING  67 

position  if  the  friends  of  the  movement  could 
only  be  made  to  see  it. 

Such  a  principle  would  dictate  a  policy  as  to 
investments  having  in  view  a  large  return  to 
depositors.  Following  the  approved  policy  of 
existing  savings-banks  in  America,  such  loans 
would  largely  be  on  real  estate  security,  which 
might  average  a  gross  interest  of  about  6  per 
cent.  In  larger  cities  a  pawn-shop  feature 
might  be  added,  which  should  yield  about  10 
per  cent.  ^ 

^  Since  1840  the  state  pawu-shop  system  of  Madrid,  known 
by  the  name  of  "  Mont-de-Piete" ,  which  dates  from  1803,  has 
been  joined  to  the  savings-bank.  Since  then  tlie  two  have 
been  under  state  management  as  a  single  institution,  entirely 
successful  and  self-supporting.  Loans  are  made  by  the  pawn 
department  on  deposit  of  jewels,  diamonds,  precious  stones, 
linen  articles  of  clothing,  and  government  securities,  at  the 
remarkably  low  rate  of  6  per  cent  per  annum.  Notwithstand- 
ing this  low  rate  the  savings  department  is  able  to  insure  the 
depositors  an  interest  of  4  per  cent  per  annum.  A  rate  of  13 
per  cent  in  America  would  prove  a  great  boon  to  the  deserving 
patrons  of  the  pawn-shops,  at  the  same  time  netting  the  bank 
about  10  per  cent  and  appreciably  increasing  the  general  in- 
terest-bearing power  of  the  deposits.  For  fuller  account  of 
the  Madrid  system,  see  "Report  on  the  System  of  Pawn- 
broking  in  Spain,"  by  H.  Drummond  AVolff,  in  Reports  fro7)i 
he?-  Majesty's  Representdtices  Abroad  on  the  Systems  of  Pawn- 
h-oking  in  Various  Countries  (August,  1894). 


68  SAVINGS    INSTITUTIONS 

The  above  considerations  are  directed  mainly 
to  the  education  of  adults  in  saving.  The 
logical  starting-place  of  savings-banks  is  the 
elementary  schools.  Savings-banks  should 
above  all  be  placed  within  the  knowledge  of 
children,  and  their  methods  and  advantages 
should  be  explained  to  every  child.  This 
would  be  the  surest  way  of  bringing  within 
reach  the  realization  of  the  sense  of  order 
which  culture  creates.  Savings-banks  offer 
most  attractive  facilities  for  impressing  youth 
with  the  value  of  providence.  While  the 
pupil  is  learning  the  advantages  of  sacrificing 
the  small  pleasures  of  the  present  for  the 
greater  pleasures  of  the  future  through  his 
weekly  investments  in  savings-bank  credits, 
he  is  acquiring  a  new  zest  for  the  mastery  of 
arithmetical  sums  and  the  rules  of  interest. 
In  many  ways  it  can  be  made  to  fit  in  and 
supplement  the  general  curricula. 

Providence  is  the  faculty  which  there  is 
most  need  to  cultivate  in  the  child.  Educa- 
tion must  instil  into  the  thought  of  the  child 


EDUCATIONAL   ASPECTS    OF   SAVING  69 

the  character  of  property,  the  desirabihty  of 
its  lawful  possession,  and  the  means  of  acquir- 
ing it.  Criminality  largely  flows  from  hazy 
conceptions  of  the  character  of  property  and 
proper  methods  of  acquiring  it.  Education 
should  enforce  these  things  upon  the  minds  of 
the  young  by  the  most  simple  and  concrete 
methods.  Children  are  like  savages  in  their 
conception  of  property.  Any  one  who  has 
watched  the  Indians  at  an  agency,  spending 
the  money  which  they  draw  from  the  govern- 
ment, knows  how  aptly  they  represent  the 
childhood  of  the  race  in  the  use  of  money.  ^ 

^  It  is  gratifying  to  see  how  clearly  this  weakness  is  recog- 
nized, and  how  intelligent  a  treatment  is  applied  by  the  super- 
intendent of  the  leading  Indian  school  in  America,  as  shown 
in  the  following  extracts  from  a  letter  to  the  writer: — 

"We  still  use  the  savings-bank  as  an  adjunct  to  our  sys- 
tem of  education,  and  it  has  grown  and  enlarged  as  the  school 
has  grown.  We  place  equal  emphasis  on  the  earning.  We 
require  our  students  to  earn  and  save. 

' '  During  the  summer  we  place  out  in  the  country  a  very 
large  proportion  of  our  students.  Just  now  we  have  out  586. 
They  are  all  earning  good  wages  in  proportion  to  their  ability. 
The  earnings  of  the  school  year  will  probably  exceed  $25,000. 
We  impress  upon  those  who  have  charge  of  our  students  to 
teach  them  to  save,  to  buy  whatever  may  be  necessary  eco- 
nomicallj%  and  to  buy  with  wisdom.  We  have  a  system  of 
reports  which  keeps  us  informed  in  regard  to  each  case,  so 


70  SAVINGS   INSTITUTIONS 

While  they  are  wretchedly  clothed  and  housed, 
they  will  invest  their  money  in  bright  tin 
boxes  and  Saratoga  trunks. 

The  idea  of  school  savings  dates  from  1834, 
when  it  was  adopted  in  a  communal  school  in 
Le  Mans,  France.  The  system  was  next  es- 
tabhshed  at  Wlirtemberg  in  1846,  and  in  Buda 
Pesth  in  1866.  The  most  active  propaganda 
was  commenced  in  Belgium  in  1866  by  Pro- 
fessor Laurent,  of  the  University  of  Ghent, 
who  travelled  about  the  kingdom,  going  from 
school  to  school  explaining  the  advantages  of 
such  an  institution  to  educators  and  the  people. 
As  a  result  of  his  labors,  about  1800,000  was 
deposited  by  the  children  of  the  country  by 
the  close  of  1891.     The  system  has  now  been 

that  we  can  ourselves  emphasize  instructions.  Students  going 
out  each  make  a  contract,  and  part  of  that  contract  is  to  save. 
"  The  banking  system  is  in  the  school,  but  we  use  the  local 
bank  and  |10,000  in  6  per  cent  bonds.  The  bank  pays  3  per 
cent.  Our  depositors  number  700,  practically  seven-eighths  of 
our  pupils.  The  others  would  be  depositors,  were  they  not 
too  young  to  earn  money  or  too  recently  arrived."  From  a 
letter  from  Captain  R.  H.  Pratt,  of  the  Tenth  United  States 
Cavalry,  superintendent  of  the  Carlisle  Indian  Industrial 
School  at  Carlisle,  Pennsylvania. 


EDUCATIONAL   ASPECTS   OF   SAVING  71 

introduced    into    most    of    the   countries  in 
Europe. 

France  now  leads  the  world  in  this  depart- 
ment of  education,  thanks  to  the  scientific 
methods  and  complete  devotion  of  M.  A.  C. 
Malarce.  He  was  deputed  by  his  govern- 
ment to  make  a  study  of  educational  methods, 
with  especial  reference  to  economic  instruction 
at  the  Vienna  Exposition  in  1873.  He  also 
visited  the  schools  savings-banks  in  Belgium, 
Germany,  and  England,  and  consulted  with 
Professor  Laurent  and  other  authorities.  The 
plan  which  he  developed  is  now  in  use,  under 
the  protection  of  the  government,  throughout 
France.  In  1892  there  were  23,375  schools 
where  children's  savings  were  received,  and 
through  them  478,173  children  kept  savings 
accounts  which  reached  the  aggregate  of  12,- 
683,312  francs.  A  frequent  mode  of  bestow- 
ing aid  is  to  give  to  the  children  of  the  poor  a 
savings-bank  account  in  lieu  of  money. 
Madame  Carnot,  wife  of  the  French  presi- 
dent, in  1888  distributed  among  four  hundred 


72  SAVINGS   INSTITUTIONS 

of  the  poorest  children  in  Paris  savings-bank 
books,  each  containing  a  credit  of  ten  francs. 
The  systems  in  use  in  Germany,  Hungary, 
Russia,  Switzerland,  Denmark,  Holland,  and 
England,  are  commonly  managed  by  private 
associations.  In  Italy  the  number  of  chil- 
dren depositors  through  the  schools  increased 
from  11,933  in  1876  to  65,062  in  1885,  and  to 
102,832  in  1888;  but  there  was  a  drop  to 
90,974  in  1890.  The  amounts  of  deposits  for 
the  same  periods  were  32,049  lire,  376,345 
Ure,  and  496,564  and  382,674  lire.  In  Hun- 
gary the  increase  has  been  constant,  starting 
with  2,621  pupils  in  1876,  and  reaching  37,737 
in  1890;  and  the  total  of  deposits,  which  had 
started  with  only  13,337  gulden,  had  reached 
113,264  gulden  in  1886.  In  Germany  in  the 
year  1883  savings-banks  in  connection  with  834 
schools  had  61,940  children  patrons  and  de- 
posits amounting  to  some  640,000  marks. 
Besides  these  there  were  about  50  other  chil- 
dren's savings-banks.  In  1892  there  were  158 
cities  and  2,272  villages  in  the  empire  with 


EDUCATIONAL   ASPECTS   OF   SAVING  73 

facilities  designed  especially  for  youthful  sav- 
ing. They  include  1,091  school  savings-banks, 
with  about  4,000  places  of  deposit,  1,821 
Youths'  Deposit  Banks  {Jugend  Darlehnkas- 
sen),  19  confirmation  banks,  336  pfennig  sav- 
ings-banks, and  100  Sunday-school  savings- 
banks.  There  were  in  all  243,933  youthful 
patrons  of  these  various  institutions,  and  sav- 
ings amounting  to  some  1.76  million  marks. 

A  common  scheme  for  encouraging  small 
savings,  adopted  by  the  postal  and  other  sav- 
ings-banks, is  the  issuing  of  cards  containing 
printed  spaces  for  stamps.  The  depositor 
may  invest  his  savings  in  postage-stamps  of 
the  denominations  of  a  penny,  ten  centimes, 
and  the  like,  and  paste  them  in  these  spaces. 
When  his  card  is  fiUed,  it  contains  an  equiva- 
lent in  stamps  of  the  minimum  deposit  which 
the  bank  will  receive, — as  a  shilling,  a  franc, 
— and  then  it  will  be  received  as  money.  In 
England  such  blank  cards  can  be  had  at  all 
post-offices  on  application.  In  England,  also, 
agents  of  the  postal  banks  go  to  the  school- 


74  SAVINGS    INSTITUTIONS 

houses  to  collect  the  children's  deposits,  if 
such  an  arrangement  be  desired.  In  Italy  the 
teacher  may  receive  deposits  from  his  pupils, 
and  may  obtain  from  the  postal  savings-bank 
a  book  in  which  the  entire  sum  of  deposits  is 
credited  from  time  to  time,  the  teacher  him- 
self keeping  the  individual  accounts  of  the 
pupils  separate. 

The  matter  seems  to  have  first  come  into 
public  notice  in  the  United  States  in  a  paper 
read  by  Mr.  John  P.  Townsend,  of  New  York, 
before  the  American  Social  Science  Associa- 
tion in  1876,  and  about  the  same  time  through 
articles  for  the  press  by  Mr.  T.  S.  Merrill,  of 
Beloit.  Mr.  Merrill  was  instrumental  in  es- 
tablishing a  bank,  founded  on  the  result  of  his 
investigation  in  Europe,  in  the  public  schools 
of  Beloit,  which,  however,  only  lasted  five 
years.  The  next  experiment  in  this  direction 
was  that  of  Captain  R.  H.  Pratt,  of  the  Tenth 
Cavalry,  superintendent  of  the  Carlisle  In- 
dian Industrial  School. 

An  interesting  experiment  was  that  of  Su- 


EDUCATIONAL   ASPECTS   OF   SAVING  75 

perintendent  C.  M.  Carpenter  in  the  public 
schools  of  Bloomington,  Indiana.  This  was 
made  to  yield  the  depositors  10  per  cent  inter- 
est by  operating  in  connection  with  a  local 
building  association.  The  money  from  the 
different  grades  was  placed  in  envelopes,  and 
these  were  taken  to  the  Workmen's  Building 
&  Loan  Fund  and  Savings  Association.  The 
school  was  carrying  100  shares  of  running 
stock,  for  which  it  paid  25  dollars  weekly. 
The  balance  of  the  deposit  was  applied  to  the 
purchase  of  paid-up  stock  bearing  6  per  cent 
interest.  This  high  rate  was  due  to  a  num- 
ber of  causes.  Being  conducted  on  the  co- 
operative principle,  there  were  no  salaried 
officers  and  scarcely  any  expense  of  any  kind. 
Interest  was  only  paid  on  even  dollars ;  and 
deposits  were  not  paid  interest  from  the  date 
of  deposit,  but  interest  began  to  run  from  the 
last  Monday  in  the  month.  Out  of  1,100 
pupils  in  1893,  650  were  depositors.  The 
average  weekly  deposit  for  the  school  was 
$47.17,  and  the  average  weekly  withdrawal 


76  SAVINGS    INSTITUTIONS 

was  $13.81,  The  subsequent  history  of  the 
experiment  shows  how  essential  it  is  to  have 
teachers  aroused  to  the  importance  of  such  an 
institution.  On  the  removal  of  Suj)erintend- 
ent  Carpenter,  who  was  the  organizer  and 
manager,  all  the  deposits  were  soon  withdrawn 
because  his  successor  took  no  interest  in  it. 

The  present  development  of  school  savings 
in  this  country  is  due  largely  to  the  enthusiasm 
and  untiring  efforts  of  Mr.  J.  H.  Thiry,  of 
Long  Island  City,  and  of  Sarah  Louisa  Ober- 
holzer,  of  Norristown,  Pennsylvania.  Mr. 
Thiry,  who  is  a  native  of  France,  came  to 
this  country  a  few  years  ago  for  his  health, 
and  has  since  proven  himself  an  invaluable 
citizen.  While  serving  as  school  commis- 
sioner in  Long  Island  City  in  1885,  he  intro- 
duced the  savings  system  into  the  city  schools ; 
and  he  is  still  a  tireless  worker  for  school  sav- 
ings. The  spirit  and  method  of  this  work  in 
America  are  best  described  in  Mr.  Thiry 's  own 
words : — 

* '  Here,  then,  is  the  field,  the  inspiration,  and 


EDUCATIONAL   ASPECTS   OF   SAVING  77 

the  aim  of  the  school  banking  system.  It 
takes  the  principles  of  frugality  and  thrift 
down  into  the  training-ground  of  the  young, 
— the  public  schools, — and  confirms  them  in 
those  habits  upon  which  success  in  their  future 
struggles  for  competence  will  depend.  By  so 
doing  it  fosters  the  morals,  for  a  better  man- 
hood is  inseparable  from  a  frugal  life.  Thus 
school  banking  is  in  thorough  harmony  with 
the  school ;  for,  as  the  school  aims  at  making 
a  good  citizen,  so  likewise  does  school  bank- 
ing. It  is  an  object-lesson  in  political  econo- 
my, and  is  of  telling  import  when  the  pupil 
at  last  crosses  the  line  which  divides  the 
worlds  of  business  and  study.  The  practical 
conduct  of  school  banking  is  very  simple. 
Every  Monday  morning  ten  minutes  are  de- 
voted by  teachers  to  the  collection  of  the  sav- 
ings of  the  scholars.  These  savings  are  de- 
posited in  the  savings-bank  to  the  credit  of 
the  scholars.  When  a  child  has  a  deposit  of 
one  dollar,  the  bank  provides  a  bank-book. 
Money  is  only  to  be  withdrawn  by  check, 
signed  by  the  depositor  and  by  the  parent  or 
teacher. 

"  This  method,  varying  somewhat  from  that 
of  Belgium  and  other  European  lands,  I  had 
the  privilege  of  introducing  into  the  schools 
of  Long  Island  City,  New  York,  in  1885. 
What  have  been  the  results  of  the  movement, 
then  only  to  be  regarded  as  a  hazardous  inno- 
vation ?  Twelve  years  have  passed.  School 
banking  long  ago  ceased  to  be  an  experiment. 
It  is  now  in  successful  operation  in  sixty-three 


78  SAVINGS    INSTITUTIONS 

cities  and  villages  in  the  nation.  The  total 
amount  deposited  to  the  credit  of  the  children 
is  §4:51,211.37.  Of  this  amount  $158,197.14 
remained  due  to  the  depositors  March  16, 
1897.  These  statistics  represent  what  may  be 
described  as  the  regular  system  of  school 
banking.  This  system  has,  however,  given 
rise  to  several  others  in  the  schools,  such  as 
the  stamp  and  collection  systems,  and  to  sev- 
eral philanthropic  organizations  of  a  more  gen- 
eral character,  such  as  the  Penny  Provident 
Fund  of  New  York,  the  Provident  Savings 
Bank  of  Baltimore,  and  the  Stamp  Savings 
System  of  Grand  Eapids,  Michigan."^ 

Mr.  Thiry  pul)lishes  an  annual  report  of 
the  standing  of  the  different  school  savings- 
banks  in  the  United  States.  The  report  for 
the  year  ending  March  16,  1898,  shows  a  total 
number  of  school-houses  having  savings- 
banks  of  349,  and  these  containing  1,809 
banks.  In  these  schools  there  were  registered 
97,999  pupils,  of  whom  41,863,  or  nearly  one- 
half,  were  depositors.  The  total  deposits 
amounted  to  $530,319,  and  the  total  with- 
drawals to  $350,668,  leaving  due  the  deposi- 

1  Extract  tVora  an  address  before  Council  of  State  Superin- 
tendeuts  at  Onondaga,  N.  Y.,  October  23,  lb97,  and  published 
in  the  Keport  of  the  Transactions  of  the  Association. 


EDUCATIONAL  ASPECTS   OF   SAVING  79 

tors  $179,651.  As  compared  with  the  stand- 
ing for  the  year  ending  March  16,  1897,  the 
report  shows  extraordinary  progress.  There 
were  then  only  280  schools  with  banks,  and 
only  1,572  banks. 

An  index  to  the  capacity  of  Mr.  Thiry  and 
Mrs.  Oberholzer  for  propaganda  is  found  in 
the  fact  that,  out  of  the  total  number  of 
school-houses  containing  savings-banks,  53 
are  in  New  York  and  153  in  Pennsylvania, 
their  respective  home  states.  These  figures 
also  furnish  an  index  to  the  inadequacy  of  the 
voluntary  movement.  It  is  no  disparagement 
of  the  principal  movers  in  the  cause  to  con- 
clude that,  after  thirteen  years  of  active  and 
earnest  effort,  the  results  attained  are  proof 
of  the  inadequacy  of  unaided  voluntary 
action.  In  these  years  only  seventy -six  towns 
and  cities  in  the  United  States  have  adopted 
school  savings,  and  these  extend  over  only 
eight  states.  Scarcely  an  impression  has  been 
made  upon  the  school  system  of  the  country. 
The  reasons  should  be  clear  enough. 


80  SAVINGS    INSTITUTIONS 

The  voluntary  system  places  too  great  a 
reliance  upon  the  skill  and  interest  of  super- 
intendents and  teachers.  This  is  the  rock  on 
which  a  number  of  school  banks  have  gone 
to  pieces,  notably  the  one  in  Bloomington,  In- 
diana, before  mentioned.  Every  change  of 
superintendents  must  place  in  peril  the  con- 
tinuance of  the  children's  savings  sytem,  be- 
cause its  vitaUty  depends  upon  the  interest  and 
appreciation  of  the  incoming  superintendent. 

In  the  second  place  the  system  imposes  too 
heavy  a  burden  upon  the  superintendent.  If 
it  is  made  a  regular  requirement,  the  superin- 
tendent, or  teacher,  may  be  expected  to  give 
instruction  in  the  general  principles  of  sav- 
ing ;  but,  in  order  for  this  much  to  be  accom- 
phshed,  it  should  be  a  universal  and  weU- 
recognized  feature  of  school  training.  In 
addition  to  this  the  system  requires  the  teacher 
to  be  to  an  extent  a  banker,  and  it  requires 
him  to  enter  into  rather  a  complicated  ar- 
rangement with  a  local  bank;  and  he  may 
have  no  qualification  for  either  of  these  offices. 


EDUCATIONAL   ASPECTS   OF   SAVING  81 

Another  obstacle  to  their  success  is  a  lack 
of  confidence  in  local  banking  institutions. 
Mrs.  Oberholzer  writes,  ' '  The  lack  of  public 
confidence  in  banking  institutions  has  been 
our  greatest  drawback  in  the  introduction  of 
school  savings-banks."  In  the  same  letter 
she  says,  ' '  I  am  in  favor  of  postal  savings, 
and  all  secure  and  legitimate  methods  for 
saving  money  for  individual  and  public  bene- 
fit. ' '  Where  there  are  a  number  of  banks  in 
a  locahty,  it  may  often  be  a  dehcate  matter 
to  select  one  of  them  to  manage  the  school 
savings.  Local  jealousies  growing  out  of 
such  selection  might  seriously  embarrass  the 
superintendent  and  cripple  the  success  of  the 
institution. 

Hence  the  two  chief  desiderata  for  a  suc- 
cessful school  savings  system  are  (1)  the  incor- 
poration of  instruction  in  savings  in  the  cur- 
ricula of  the  school,  and  (2)  a  safe  and  compe- 
tent outside  agency  for  the  collection  and  cus- 
tody of  the  funds.  With  instruction  and 
periodical  visitation  reduced  to  method,  the 


82  SAVINGS    INSTITUTIONS 

foundation  for  the  greatest  progress  in  sav- 
ings will  have  been  laid. 

A  postal  savings  system  can  afford  a  satis- 
factory custody  and  a  competent  corps  of  col- 
lectors to  make  periodical  visits  to  the  schools. 
The  postal  system  has  the  additional  advant- 
age of  reaching  both  the  parents  and  the  chil- 
dren. It  can  send  its  missionaries  to  the  home 
and  to  the  factory  to  collect  savings  and  to 
explain  the  principle  of  the  savings-bank. 
For  any  private  institutions  such  visits  would 
be  very  delicate  undertakings,  and  doubtful 
as  to  their  results. 

The  full  value  of  school  savings  could  not 
be  reached  unless  the  parents  were  also  indoc- 
trinated with  the  idea,  and  the  parents  need 
considerable  instruction  in  order  to  secure 
their  co-operation.  Poor  parents,  whose  chil- 
dren earn  money  out  of  school  hours,  are 
often  incompetent  to  advise  their  children  as 
to  how  to  spend  their  earnings,  which  are 
very  likely  to  be  spent  to  the  injury  of  the 
children.     Newsboys  are  alarmingly  addicted 


EDUCATIONAL   ASPECTS   OF   SAVING  83 

to  the  use  of  tobacco.  If  their  parents  could 
be  induced  to  become  patrons  of  the  savings- 
banks  in  ever  so  small  a  way,  the  school  sav- 
ings-banks would  have  secured  a  powerful  ally. 
The  need  of  such  co-operation  is  also  great 
in  the  case  of  the  well-to-do  parents.  To 
such  famihes  the  savings-bank  visitor  might 
suggest  salutary  modifications  in  the  domestic 
economy.  The  pampering  of  children  in  such 
families  is  likely  to  prove  their  ruin.  An 
unwise  and  indiscriminate  catering  to  the 
wants  of  children  is  the  most  natural  fault  of 
a  parent  who  is  able  to  respond  to  their  appeals. 
In  this  respect  the  children  of  the  poor  have 
the  advantage.  They  at  least  learn  the  lesson 
of  making,  if  they  know  nothing  of  saving. 
A  wholesome  doctrine  for  the  adoption  of 
v^ell-to-do  homes  would  be  to  teach  the  chil- 
dren to  look  to  their  parents,  as  a  matter  of 
course,  for  provision  for  their  physical  neces- 
sities and  for  their  education,  but  for  nothing 
more  than  this.  Facilities  for  earning  should 
be  afforded  by  the  parent,  if  necessary,  in  the 


84  SAVINGS    INSTITUTIONS 

care  of  the  house  and  grounds  or  the  garden 
or  the  furnace  or  amanuensis  work  or  doing 
errands.  In  such  cases  payment  should  not 
be  made  in  money,  but  in  certificates  of  de- 
posit in  the  savings-bank.  Every  opportunity 
and  facihty  should  be  used  for  increasing  the 
acquaintance  and  familiarity  with  the  savings- 
bank. 

These  considerations  point  to  the  savings- 
bank  as  the  best  educator  in  practical  econo- 
my. They  recognize  the  present  economic 
order  as  the  order  of  the  future,  in  so  far  as 
we  have  any  concern.  With  this  fact  kept 
in  view,  it  will  be  seen  that  the  chief  remedy 
proposed,  state  education  in  saving  cannot  be 
regarded  as  in  any  sense  socialistic.  Its  spirit- 
is  as  diametrically  opposed  to  collectivism  as 
possible ;  for  it  seeks,  above  all,  to  strengthen 
the  individual  for  the  battles  of  competition. 
It  seeks  to  impress  the  lessons  of  self-control 
and  self-discipline  for  the  building  up  of  eco- 
nomic strength. 

It  has  been  the  object  of  the  writer  in  the 


EDUCATIONAL   ASPECTS   OF   SAVING  85 

preceding  pages  to  direct  attention  to  what 
seems  a  serious  danger  in  the  present  trend  of 
mehorative  thought;  and,  in  so  far  as  this 
trend  of  thought  seeks  the  elevation  of  the 
masses  through  the  influences  of  culture,  he 
has  sought  to  expose  its  weakness.  He  has 
also  sought  to  trace  the  economic  bearings  of 
education  and  to  indicate  how  far  existing  sys- 
tems come  short  of  the  ideal.  He  considers 
the  building  of  economic  strength  to  be  the 
chief  function  of  education.  Here  he  would 
not  be  considered  as  favoring  a  merely  materi- 
alistic scheme  of  education,  neglecting  the 
imaginative,  sesthetic,  and  ethical  sides  of  the 
child's  nature,  but  as  emphasizing  the  inter- 
dependence of  growth  in  culture  and  of  con- 
trol over  immediate  wants.  A  recognition  of 
the  incompetency  of  present  educational 
schemes  to  build  up  an  economic  basis  for 
growth  in  individual  culture  will  at  the  same 
time  lead  to  a  recognition  of  the  grain  of 
truth  in  the  assertion,  so  often  made,  that  our 
educational  systems  are  impractical.     Follow- 


86  SAVINGS    INSTITUTIONS 

ing  this  line  of  reasoning,  the  writer  is  forced 
to  the  conclusion  that  instruction  in  saving, 
both  by  precept  and  example,  both  to  children 
and  adults,  promises  more  than  anything  else 
to  give  the  practical  finish  to  our  educational 
schemes.  He  believes  that  an  institution 
which  will  commend  itself  to  the  approval 
and  the  confidence  of  the  masses  in  so  far  as 
to  secure  their  patronage  will  conduce  more 
than  almost  anything  else  to  individual  self- 
realization. 

The  scheme  of  required  instruction  in  sav- 
ing, supplemented  by  a  central  public  savings- 
bank,  indicates  the  writer's  view  as  to  the  ex- 
tent to  which  economics  should  be  taught  in 
the  elementary  schools.  It  might  well  be 
taught  under  the  name  of  practical  economics ; 
for  it  promises  to  guide  the  individual  to  a 
higher  plane  of  living,  to  supply  him  with 
both  the  theory  and  the  facilities  for  attaining 
unto  the  better  things  of  life. 

Finally,  these  views  are  presented  in  the 
belief  that,  if  the  educational  aspects  of  sav- 


EDUCATIONAL   ASPECTS   OF   SAVING  87 

ings  are  clearly  recognized  by  the  public,  it 
will  wisely  influence  the  provisions  for  a  state 
savings-bank  in  America,  when  public  senti- 
ment is  ripe  for  such  an  institution. 


CHAPTER  III 

SAVINGS  AND   INSURANCE 

Every  form  of  providence  is  essentially,  if 
not  intentionally,  of  the  nature  of  insurance 
— all  tend  to  insure  against  economic  suffer- 
ing.    Perhaps  the  only  distinction  that  can  be 
made  between  "  laying  by  "  in  the  more  pop- 
ular sense  and  "  laying  by  "  for  the  express 
purpose   of  insurance  is  that  in  the  former 
case  an  improvement  upon  the  present  eco- 
nomic status — the  enjoyment  of  a  larger  in- 
come— enters   into   the   conscious  reckoning, 
while  in  the  latter  a  provision  against  suffer- 
ing or  inconvenience  caused  by  diminution  or 
a  cessation  of  revenue  from  present  sources 
is  contemplated.     The  motive  of  the  one  is  in 
the  direction  of  economic  progress  or  dynamic 
— while  the  energies  of  the  other  are  devoted 
to  the   maintenance  of  an   economic   status. 

(88) 


SAVINGS   AND   INSURANCE  89 

To  illustrate, — in  case  of  loss  from  fire  or  de- 
falcation the  insured  loser  has  provided  in  ad- 
vance for  the  repair  of  the  damage — in  case  of 
diminished  productive  powers  occasioned  by 
old  age  provision  is  made  for  a  new  source  of 
revenue,  perhaps  not  equal  to  the  present  in- 
come from  labor,  but  in  most  instances  the 
family  will  have  grown  smaller  and  the  wants 
will  have  become  less  numerous  and  less 
urgent.  In  case  of  death,  the  insurance  is 
also  designed  to  satisfy  the  want  thus  created 
— and  this  want  might  be  represented  by  the 
difference  between  the  production  and  the 
consumption  of  the  deceased — or  the  net 
amount  which  he  has  been  accustomed  to 
contribute  to  the  well-being  of  the  dependent 
members  of  his  family. 

The  causes  which  render  provision  against 
misfortune  so  urgent  at  the  present  time  may 
be  included  under  two  heads, — the  regime  of 
competition,  and  the  regime  of  large  aggrega- 
tions of  capital. 

Competition  has  succeeded  custom  in  the 


90  SAVINGS    INSTITUTIONS 

regulation  of  business  affairs,  and  competi- 
tion is  war,  and  commercial  mortality  has 
come  to  be  spoken  of,  in  relation  to  industrial 
crises,  in  much  the  same  way  as  human  mor- 
tality was  referred  to  under  the  military 
regime.  Hence  the  business  man  seeks  to 
make  himself  secure  against  want  in  his  old 
age,  in  event  of  business  failure,  to  secure  his 
family  against  want,  in  case  of  his  death ;  and 
the  frequent  closing  down  of  defeated  indus- 
tries renders  employment  also  precarious  and 
a  fit  subject  for  insurance. 

The  regime  of  large  aggregations  of  capital 
is  attended  by  extraordinary  hazards,  both  to 
capitaUsts  and  to  laborers.  CapitaUsts  have 
large  interests  at  stake  in  the  tangible  property 
of  their  business,  and,  but  for  provisions 
against  it,  a  fire  might  result  in  complete  ruin. 
They  are  also  much  at  the  mercy  of  trusted 
agents  and  other  employees  who  are  necessar- 
ily exposed  to  great  temptations  to  embezzle- 
ments ;  and  such  risks,  if  not  provided  against, 
would  greatly  increase  commercial  precarious- 


SAVINGS   AND   INSURANCE  91 

ness.  ^  And  risks  incurred  by  laboring  men 
are  even  greater  than  those,  as  from  accident, 
or  death  caused  by  the  dangerous  machinery 
with  which  they  are  obliged  to  work ;  and  a 
double  incentive  to  precaution  is  imposed  here 
by  the  necessity  for  providing  against  misfor- 
tunes due  to  the  carelessness  or  fault  of  a  fel- 
low-servant. 

Institutions  have  sprung  up  in  response  to 
these  demands  and  the  business  of  insurance 
has  become  almost  a  science.  Studies  of  hu- 
man and  industrial  mortality  statistics,  as 
well  as  statistics  of  accidents,  of  clerical  dis- 
honesty, etc.,  are  made  the  bases  of  estimates 
of  risks  upon  which  are  construed  schedules 
of  prices  to  patrons.  Companies  reduce  risks 
almost  to  the  quality  of  ordinary  merchandise 
of  different  grades,  and  expose  them  to  the 
public  for  sale,  the  price  being  roughly  deter- 
mined by  the  estimated  chances  of  life,  of 
freedom  from  physical  debility  caused  by  acci- 

*  Surety  companies  are  essentially  insurance  societies. 


92  SAVINGS    INSTITUTIONS 

dent  or  sickness,  of  commercial  integrity,  or 
of  immunity  from  fire. 

This  species  of  merchandise,  as  ah-eady  in- 
dicated, belongs  to  a  period  of  industrial  inse- 
curity. It  had  no  place  in  the  mediaeval  guild 
system,  in  which  the  principles  of  custom  and 
of  succession  so  largely  ruled.  In  fact  noth- 
ing of  the  character  of  life  insurance  was 
known  until  about  the  16th  century,  and  then 
underwriters  insured  lives  only  for  short 
periods.  The  next  three  centuries  marked  the 
experimental  stage,  and  the  experiments  were 
mostly  failures,  which  resulted  in  part  from 
an  insufficient  statistical  data  upon  which  to 
estimate  risks,  and  in  greater  part  from  the 
meagerness  of  the  demand  for  such  an  insti- 
tution. The  development  of  life  insurance  on 
a  large  scale  was  not  effected  until  the  close 
of  the  nineteenth  century,  and  its  present  char- 
acter and  dimensions  have  sprung  from  the  in- 
dustrial conditions  of  the  century  just  closed. 

These  institutions  have  been  inspired  partly 
by  commercial  and  partly  by  altruistic  motives, 


SAVINGS   AND   INSURANCE  93 

but  the  tendency  has  been  for  the  commercial 
motive  to  predominate,  for  the  reason  that  the 
business  is  such  as  to  call  into  play  a  very 
high  order  of  commercial  ability,  and  it  is 
sufficient  to  produce  admirable  results  among 
a  large  class  of  people.  It  is  likely  to  reach 
more  people  than  the  altruistic  motive,  for  the 
reason  that  it  does  not  simply  open  an  office 
and  offer  policies  for  sale,  but  it  sends  out 
diligent  emissaries  who  are  not  accustomed  to 
neglect  any  whose  situation  could  permit  them 
to  become  patrons.  The  emissaries,  however, 
do  not  go  below  a  certain  industrial  level; 
their  keenness  of  scent  is  shapened  by  the 
prospective  commission  which  is  taken  out  of 
the  first  payments,  and  the  amount  of  this 
excludes  the  class  which  might  only  begin 
with  a  payment  of  fifty  cents  or  one  dollar.  ^ 

^  Industrial  insurance  associations  have,  however,  in  the  last 
few  years  come  into  prominence,  as  in  case  of  the  Prudential 
Assurance  Company  of  London,  in  which  about  one-third  of 
the  population  of  England  are  said  to  have  policies,  and  the 
Metropolitan,  and  the  Prudential,  and  the  John  Hancock,  of 
America.  These  employ  the  commercial  motive  in  securing 
policies — making  the  agent's  compensation  depend  upon  the 


94:  SAVINGS  INSTITUTIONS 

The  needs  of  the  working-class  must  there- 
fore be  met,  either  through  self-interest  seek- 
ing provision  for  the  future  through  co-opera- 
tion, or,  through  individual  philanthrophy, 
or,  through  public  patronage. 

The  first  of  these  methods  is  of  doubtful 
expediency.  At  least  co-operative  insurance, 
as  a  distinct  institution,  seems  never  to  have 
thriven.  This  statement  may  seem  to  con- 
tradict Mr.  Willoughby,  who  speaks  of  the 
laboring  classes  as  organizing  "  purely  volun- 


amount  of  the  collections  ;  the  commissiou  is  sometimes  15 
and  sometimes  20  per  cent,  and  the  agents  acting  under  this 
stimulus  are  usually  verj^  energetic  in  prosecuting  their  work. 
They  are  obliged  to  adjust  their  methods  to  the  class  to  which 
they  look  for  patronage,  and  the  weekly  payment  plan  is 
adopted,  which  necessitates  a  higher  commission  for  collecting. 
The  small  saving  power  of  this  class  is  shown  in  the  failure  of 
every  attempt  at  having  the  payment  period  as  far  apart  as  a 
mouth. 

The  .scheme  is  criticized  on  the  following  grounds:  First, 
because  it  is  practically  a  funeral  benefit.  Second,  l)ecause 
many  vei-y  jjoor  persons  are  induced  to  become  members  who 
aie  not  able  to  keep  up  the  payments  and  thereby  lose  through 
lapses  what  they  have  paid  in.  Third,  because  at  best  it  is 
an  expensive  form  of  savings  on  account  of  the  cost  of  col- 
lecting the  frequent  payments. 

For  an  interesting  discu.ssion  of  this  plan  of  insurance  .see 
articles  under  the  caption  "Industrial  Insurance "  in  Charity 
Review  for  March,  April  and  May,  1898. 


SAVINGS   AND    INSURANCE  95 

tary  institutions  for  their  mutual  assistance  in 
cases  of  accident  or  sickness",  ^ 

But  in  the  case  of  the  Friendly  Societies  of 
Great  Britain,  to  which  Mr.  Willoughby  refers, 
the  development,  while  chiefly  in  the  line  of 
insurance,  in  the  very  name  implies  a  more 
sentimental  basis  than  we  usually  associate 
with  insurance  schemes.  In  fact  the  genesis 
of  the  institution  was  of  a  religious  rather 
than  of  a  providential  character,  for  the  germ 
of  the  insurance  features  consisted  in  the 
death  benefits,  and  these  have  had  their  rise 
in  the  religious  and  sentimental  demand  for  a 
"  decent  funeral".  The  protection  aimed  at 
was  not  for  the  living  but  for  the  dead.  The 
insured  was  not  securing  his  widow  or  his 
orphans  against  want,  but  he  was  providing 
for  himself  a  becoming  funeral.  In  their  later 
development,  however,  they  assume  some- 
thing of  the  character  of  co-operative  in- 
surance. 2 

1  Workiugmen's  Insurance,  p.  26. 

^  They  tend  in  Europe  to  come  under  a  measure  of  state 
regulation,  and  their  merits  have   to  some  extent  won  the 


96  SAVINGS    INSTITUTIONS 

The  principle  of  laboring  men's  insurance 
is  likely  to  be  most  successful  in  the  future  as 
an  incident  of  organizations  formed  primarily 
for  some  other  purpose.  For  example,  an  in- 
surance feature  might  be  attached  to  a  scheme 

financial  patronage  of  the  state  government.  The  govern- 
ments of  France,  Belgium,  Italy,  and  Switzerland  have  sought 
to  reduce  the  different  aid  societies  within  their  jurisdictions 
to  semi-national  systems  subject  to  a  central  control.  In 
France  they  are  relieved  of  the  burden  of  investing  their 
funds  by  the  state,  to  their  very  decided  advantage.  All 
funds  belonging  to  an  approved  society  in  excess  of  3,000 
francs  must  be  deposited  with  the  government  Caisse  des 
Depots  et  Coimgnatiom  by  which  they  are  invested  in  govern- 
ment securities,  and  the  state  practically  grants  a  subsidy  to  ap- 
proved societies  by  guaranteeing  an  interest  of  four  and  one- 
half  per  cent,  regardless  of  the  real  earnings  of  the  invest- 
ments. In  addition  to  this,  other  subsidies  are  granted  and 
some  revenue  is  derived  from  private  gifts.  Their  greatest 
work  is  in  the  line  of  sick  benefits;  but  in  addition  to  these, 
old  age  pensions,  life  insurance,  and  payment  of  funeral  ex- 
penses are  provided  for.  Institutions  of  the  local  class  are 
very  strong  on  the  Continent,  and  in  England  they  have  en- 
rolled about  eight  million  members,  while  in  America  they 
have  scarcely  made  a  start.  Mr.  J.  B.  Reynolds  in  Charities 
Review  for  May,  1898,  notes,  however,  an  aggressive  begin- 
ning in  the  Jewish  quarters  in  New  York,  where  sick  and 
funeral  benefits  are  provided.  They  have  some  strong  points 
as  stimuli  to  thrift,  and  while  they  lose  the  economies  of  a 
large  organization,  they  gain  in  considerable  gratuitous  ser- 
vice and  a  great  deal  in  the  moral  support  of  neighborly  asso- 
ciations. The  meetings  are  to  an  extent  social  gatherings;  and 
the  sense  of  association,  kept  alive  by  the  weekly  meetings, 
braces  the  members  for  the  sacrifices  which  they  have  under- 
taken. 


SAVINGS   AND   INSURANCE  97 

of  co-operative  industrial  organization,  espe- 
cially where  it  is  undertaken  on  a  large  scale, 
as  in  the  case  of  the  Rochdale  Co-operative 
System ;  or  it  might  be  made  a  feature  of  a 
co-operative  savings  bank;  or  it  may  be  suc- 
cessfully engrafted  upon  labor  unions. 

The  insurance  principle  seems  to  be  an  in- 
separable incident  of  union  labor.  The 
strength  of  the  unions  in  a  strike,  for  exam- 
ple, is  conditioned  by  the  state  of  the  strike 
fund, — which  is  a  sort  of  an  insurance  against 
unemployment.  And  as  the  unions  come  to 
recognize  this  fact  more  clearly  they  will  de- 
vote more  attention  to  the  strengthening  of 
their  finances,  and  they  will  find  it  at  once  a 
good  refuge  in  time  of  trouble  and  an  excel- 
lent device  for  avoiding  trouble.  Mr.  and 
Mrs.  Webb  tell  of  the  remarkable  experience 
of  a  union  which  for  a  period  of  fifty  years 
avoided  friction  with  the  employers. 

"Nevertheless,"  they  add,  *'it  has  known 
how  to  enforce  a  detailed  uniform  price-list  in 
every  center,  new  or  old,  in  which  the  trade  is 
carried  on ;  it  has  maintained  this  piece-work 


98  SAVINGS    INSTITUTIONS 

list  practically  unaltered  for  fifty  years,  notwith- 
standing improvements  in  processes ;  it  has  con- 
sequently kept  up  its  members'  earnings  to  cer- 
tainly more  than  £2  per  week ;  and  it  has  suc- 
cessfully enforced  a  rigid  limitation  of  appren- 
tices, there  being  nowhere  more  than  one  to 
seven  journeymen.  Yet  no  overt  collective 
movement  is  ever  made.  If  any  employer 
refuses  to  conform  to  the  regulations,  even  in 
the  slightest  degree,  the  members  leave  him 
one  by  one,  and  receive  Out-of-Work  Benefit, 
which  may  contiime  for  thirty-nine  weeks.  "^ 

The  Out-of  Work  pohcy  means  a  "hold- 
out" for  the  union  rate,  and  a  person  who 
receives  the  benefit  is  restrained  from  accept- 
ing less.  It  thus  tends  to  ehminate  the  weak- 
est element  in  labor  disputes,  viz :  an  army  of 
very  necessitous  idle  men,  within  the  craft, 
and  thus  it  greatly  strengthens  the  arm  of 
union  labor. 

The  common  policy  of  the  unions  has  been 
to  vote  subsidies  to  branches  engaged  in  a 
strike.  Sympathetic  funds  from  other  labor 
organizations  have  also  constituted  a  source 


1  "Industrial  Democracy,"  v.  1,  pp.  167-108  by  Sidney  and 
Beatrice  Webb,  referring  to  the  Leeds  Friendly  Society  of 
Spanisii  and  Morocco  Leather  Finishers. 


SAVINGS   AND   INSURANCE  99 

of  strength,  but  this  must  always  be  a  doubt- 
ful and  unreliable  quantity.  Usually  coming 
in  response  to  an  aroused  sentiment,  and  often 
given  in  the  heat  of  passion,  the  excessive 
enthusiasm  is  apt  to  weaken  the  resources  of 
contributing  organizations.  The  preparation 
for  industrial  war  should  be  made  in  time  of 
peace,  and  only  as  a  last  resort  should  the 
sympathy  of  labor  in  general  be  appealed  to 
for  financial  support. 

It  must  be  said  in  opposition  to  insurance 
through  organized  labor  that  it  is  liable  to  the 
same  perils  to  which  the  union  is  subject.  If 
the  union  is  crushed  out  the  insurance  funds 
will  be  sacrificed,  and  this  fact  might  cripple 
the  weaker  labor  unions  through  the  disincli- 
nation of  members  of  the  craft  to  invest  any 
considerable  amount  of  their  wages  in  it. 
Notwithstanding  these  objections,  however, 
union  insurance  has  gained  a  decided  footing 
both  in  England  and  America. 

It  is  an  open  question  how  far  union  insur- 
ance should  be  made  a  condition  of  member- 


100  SAVINGS    INSTITUTIONS 

ship.  It  is  beyond  question  that  insurance 
against  strikes  and  lockouts  should  be  obliga- 
tory ;  but,  if  in  addition  to  this  burden  insur- 
ance against  accident,  sickness,  old  age,  and 
chronic  non-employment,  were  added,  the 
effect  upon  the  membership  roll  might  be  bad. 
There  may  be  found  a  transition  stage  be- 
tween co-operative  insurance  and  philanthropic 
insurance  in  a  system  of  joint  contributions 
to  a  provident  fund  for  the  benefit  of  working 
men  on  the  part  of  employers  and  employees, 
a  scheme  which  has  some  vogue  on  both  sides 
of  the  Atlantic.  It  is  always  voluntary  on 
the  part  of  the  employers,  but  it  may  or  may 
not  be  on  the  part  of  the  employees.  Some- 
times contributions  to  the  fund  are  required 
of  aU  employees,  and,  whether  this  is  done  or 
not,  the  suggestion  of  a  moral  pressure  is  apt 
to  arise  in  their  minds.  And  since  the  dues 
are  not  paid  by  the  men  but  withheld  from 
their  wages  it  is  claimed  that  the  payment 
involves  no  conscious  sacrifice.  It  is  also 
argued  that  the  payment  by  the  employer  is 


SAVINGS   AND   INSURANCE  101 

in  reality  so  much  withheld  from  wages  and 
that  the  scheme  amounts  to  a  forcible  reduc- 
tion of  wages,  primarily  in  the  interest  of  the 
employer,  and  only  incidentally  in  the  interest 
of  the  laborer. 

It  is  more  than  likely  that  the  motives  as 
well  as  the  incidents  are  mixed.  The  advant- 
ages to  the  employers  are  obvious,  notably  in 
the  inducements  to  a  continued  service,  espe- 
cially in  the  case  of  a  railway  corporation.  ^ 
But  on  the  other  side  there  is  force  in  the  argu- 
ment that  the  relations  existing  between  the 
employed  and  the  employer  should  be  strictly 
jimited  to  the  terms  of  the  employment  itself. 
Where  the  employer  is  also  the  insurance 
agent,  the  landlord,  or  the  store-keeper  there 
is  almost  certain  to  grow  up  an  irritating 
sense  of  unfreedom  and  of  espionage.  The 
employee  naturally  wants  to  be  his  own  mas- 
ter out  of  working  hours.  It  is  pretty  clear, 
however,  that  the  balance  of  advantages  is  on 

1  The  development  of  this  form  of  insurance  has  been  largely 
through  the  agency  of  railway  corporations. 


102  SAVINGS    INSTITUTIONS 

the  side  of  the  laborer.  Even  if  he  pays  all 
the  dues,  and  even  if  he  surrenders  a  certain 
amount  of  mobility,  he  is  generally  better  off 
for  being  insured.  The  plan  is  also  nicely 
adapted  to  modern  industrial  organization  in 
that  it  avoids  some  of  the  difficulties  in  the 
way  of  a  more  general  scheme  of  insurance. 
It  is  more  apt  to  avoid  the  suspicion  on  the 
part  of  some  of  the  contributors  that  they  are 
bearing  a  disproportionate  share  of  the  bur- 
den, because  it  may  be  applied  to  employ- 
ments in  which  the  risks  are  relatively  equal.  ^ 

This  phase  seems  to  be  the  most  highly 
developed  in  France.  Mr.  Willoughby  says 
of  it:  "By  far  the  most  important  and 
the  most  interesting  work  is  that  done  by  the 
insurance  funds  organized  by  employers, 
either  alone,  or  in  conjunction  with  their  em- 
ployees. In  no  other  country  in  the  world 
has  so  much  been  done  in  this  way  by  em- 
ployers. In  certain  industries,  such  as  rail- 
way   transportation    and    coal    mining,    the 


1  Tlic  importance  of  this  feature  is  emphasized  by  tlie  very 
complaints  which  have  been  made  on  the  ground  of  inequality 
of  risks,  as  between  brakemeu  and  railway  telegraph  opera- 
tors. This  suggests  an  adaptation  of  the  organization  to  the 
conditions,  or  the  exclusion  of  some  classes  from  the  benefits 
where  the  disparity  of  risk  is  great. 


SAVINGS   AND   INSURANCE  103 

maintenance  of  old-age  and  accident  pension 
funds,  and  the  liberal  assistance  of  mutual- 
aid  societies  for  sick  insurance  is  almost  uni- 
versal on  the  part  of  the  largest  concerns ;  and 
the  same  is  true  to  a  great  extent  for  other 
large  employers  of  labor. ' ' 

In  America  also  this  scheme  has  taken  a 
strong  root  among  railway  companies.  Here 
some  companies,  following  the  lead  of  the 
Baltimore  and  Ohio,  which  organized  this  de- 
partment in  1880,  make  subscriptions  to  the 
insurance  fund  practically  ol)hgatory;  others 
following  the  lead  of  the  Pennsylvania  Com- 
pany offer  the  facilities  without  imposing  them 
upon  their  employees.  In  the  Baltimore  and 
Ohio  system  the  contributions  from  the  com- 
pany are  in  the  form  of  the  following  annual 
payments:  $6,000  to  the  Rehef  Fund,  825,000 
to  the  Pension  Fund,  and  §2,500  for  the  physi- 
cal examination  of  employees.  From  the  side 
of  the  employees  the  monthly  dues  range, 
according  to  the  wages  received,  in  the  class 
of  high  risks  form  $1  to  $5,  and  in  the  class 
of  low  risks  from  8.75  to  §3.75.  The  benefits 
are  for  accident,  sickness  and  death.  In  the 
case  of  accidents  they  range  from  $.50  to 
§2.50  a  day  for  the  first  twenty-six  weeks  and 
from  8.25  to  $1.25  after  that.  The  per  diem 
sick  benefits,  not  including  Sundays  and  legal 
holidays  range  from  $.50  to  $2.50.  The  death 
benefits  resulting  from  accident  are  from  $500 
to  $2,500,  and  where  resulting  from  natural 
causes  from  $250  to  $1,250. 

It  seems,  however,  to  be  a  round-about  way 


104:  SAVINGS    INSTITUTIONS 

of  reaching  an  end  where  a  direct  course 
would  answer  better.  It  has  the  form  of 
insurance  while  it  is  essentially  a  pension  sys- 
tem. The  contributions  of  the  employers  rest 
upon  no  sound  economic  doctrine,  if  the  in- 
surance theory  is  maintained.  If  they  are  of 
the  nature  of  gratuities  they  degrade  the  re- 
cipients, and  if  they  are  a  part  of  the  wages 
withheld,  they  should  not  be  called  employee's 
insurance  benefits.  From  any  point  of  view 
there  is  an  intellectual  murkiness  about  the 
scheme.  It  tends  to  increase  the  dependence 
of  the  laborer  without  educating  his  mind  un- 
less the  membership  is  purely  voluntary,  and 
if  it  is  essentially  a  pension,  it  should  be  so 
•designated. 

It  is  interesting  in  so  far  as  it  suggests  a 
transition  stage  in  the  relations  existing  be- 
tween the  employer  and  the  employee.  In 
fact,  the  thought  underlying  the  practice  of 
■employers'  insurance  seems  almost  to  shade 
into  the  new  doctrine  of  employers'  liability 
which  is  now  developing.     In  the  interest  of 


SAVINGS  AND   INSURANCE  105 

a  clear  theoretical  basis  for  social  aud  eco- 
nomic institutions,  it  is  to  be  hoped  that  the 
system  will  merge  into  a  clearly  defined 
scheme  of  rights  recognized  by  law.  ^ 

1  This  new  doctrine  is  best  represented  in  the  English  Em- 
ployers' Liability  Act  of  1897,  which  provides  that  all  work- 
ingmen  who  come  within  a  very  inclusive  list,  have  a  right  to 
indemity  for  accidents  occurring  while  at  work,  where  they 
have  been  employed  for  as  long  a  period  as  two  weeks,  when 
such  accidents  incapacitate  them,  in  whole  or  in  part,  for 
work.  The  claim  to  indemnity  may  be  defeated  by  proof 
that  the  accident  resulted  from  ' '  serious  and  wilful  miscon- 
duct", on  the  part  of  the  workman.  The  workman's  legal 
claim  upon  his  employer,  however,  is  almost  impossible  to  de- 
feat, the  burden  of  proof,  which  is  shifted  to  the  employer, 
being  a  most  difficult  one.  Unlike  common  law  claims  for 
damages,  the  fact  of  the  accident  being  admitted,  and  no  evi- 
dence of  "  serious  and  wilful  misconduct "  being  introduced, 
there  is  nothing  left  to  the  judgment  of  court  or  jury. 

If  the  accident  results  in  death,  the  heirs,  if  there  be  any, 
are  paid  a  sum  equal  to  the  earnings  for  three  years  previous 
to  the  accident,  but  not  less  than  £150,  and  not  more  than  £300. 
If  the  term  of  employment  has  been  for  a  less  period  than 
three  years,  the  heirs  are  entitled  to  receive  one  hundred  and 
fifty-six  times  the  average  weekly  earnings;  but  if  they  are 
only  partly  dependent  upon  the  earnings  of  the  deceased, 
the  amount,  if  the  parties  fail  to  agree,  will  be  reduced  by  a 
a  board  of  arbitration.  When  the  accident  results  in  partial 
or  total  incapacity  for  work,  the  employer  must  pay,  after 
the  second  week,  a  weekly  benefit  not  to  exceed  fifty  per  cent 
of  the  average  weekly  earnings  during  the  preceding  year. 
When  the  disability  is  only  partial,  the  compensation  is  deter- 
mined by  the  difference  in  the  earning  power  before  and  after 
the  accident. 


106  SAVINGS    INSTITUTIONS 

Unusual  activity  has  been  shown  in  recent 
years  by  different  state  governments  in  the 
direction  of  providing  stimuli  to  provident 
habits.  From  the  standpoint  of  the  state  the 
question  presents  a  two-fold  aspect.  On  the 
one  hand,  it  impinges  on  the  question  of  poor 
relief.  The  state  is  interested  in  anything 
which  will  tend  to  lighten  this  burden ;  and  on 
the  other  it  is  interested  in  saving  as  many  of 
its  citizens  as  possible  from  the  degradation  of 
receiving  alms.  To  this  end  voluntary  insur- 
ance schemes  have  been  added  to  state  savings 
banks,  but  with  very  poor  success. 

State  activity  in  this  line,  however,  is  not 
confined  to  countries  which  seek  to  foster 
providence  through  a  state  savings  bank ;  the 

This  plan  is  superior  to  that  of  joint  contributious  in  point 
of  (It'tinitenL'ss  and  clearness.  Whether  the  state  of  wages 
becomes  adjusted  to  it  or  whether  it  comes  out  of  profits  the 
money  received  lias  no  taint  of  charity.  It  is  also  superior  in 
point  of  simplicity,  not  being  encumbered  bj^  sick  or  old  age 
benefits,  or  by  benefits  for  any  disability  not  associated  with 
the  employment. 

It  is  inferior  to  the  voluntary  joint  contribution  system  in 
that  it  does  not  impose  any  sense  of  restraint  upon  the  em- 
ployees. It  enjoins  no  abstemiousness;  on  the  contrary,  it 
rather  encourages  prodigality. 


SAVINGS   AND   INSURANCE  107 

boldest  experiments  in  fact  have  been  made  in 
Germany  and  Switzerland,  where  the  postal 
savings  bank  has  not  been  adopted.  These  ex- 
periments include  life,  accident,  old-age  poli- 
cies, and  the  latest  and  the  most  interesting 
development  is  insurance  against  involuntary 
idleness.  ^ 

^  The  pioneering  in  this  movement  has  been  done  in  the 
states  of  Germany,  where  it  grew  out  of  the  insurance  features 
of  the  old  guild  system,  which  continued  until  after  the  rise 
of  the  factory  system.  And  it  may  be  interesting  to  note  that, 
the  provident  features  of  the  trade  guilds  find  their  modern 
survivals  in  the  insurance  features  of  such  fraternal  organiza- 
tions as  the  Odd  Fellows,  Knights  of  Pythias  and  Foresters. 
It  was  a  general  principle  of  the  guilds  to  provide  for  the  care 
of  the  sick  by  the  maintenance  of  hospitals,  where  practicable; 
otherwise  by  subscribing  to  hospitals  belonging  to  religious 
orders.  Funeral  expenses  were  provided  for,  and  the  surviv- 
ing widow  of  a  craftsman  was  allowed  to  choose  two  journey- 
men to  aid  her  in  the  management  of  the  business,  and  a  jour- 
neymen's fund  provided  for  medical  assistance  in  case  of  sick- 
ness. These  benefits,  however,  did  not  extend  beyond  the 
artisan  class,  they  did  not  reach  the  laborer  in  the  factory,  and 
the  rise  of  the  factory  system  demanded  new  devices  to  meet 
the  changed  conditions. 

The  state  had,  even  before  the  introduction  of  insurance 
proper,  imposed  obligations  of  the  nature  of  insurance,  upon 
employers  engaged  in  certain  industries.  Seamen,  domestic 
servants,  and  agricultural  laborers  received  special  protection 
by  such  legal  imposition.  For  example,  a  seaman  was  entitled 
to  a  month's  pay  or  to  a  fourth  part  of  his  hire,  in  case  he 
should  fall  ill  before  setting  out  on  a  voyage;  and  in  case  of 
death,  the  heirs  were  entitled  to  a  quarter,  a  half,  or  the  whole 


108  SA\^NGS    INSTITUTIONS 

The  modern  system  of  state  insurance  may 
have  found  its  immediate  germ  in  the  laws 
governing  mining  operations.  The  miner's 
friendly  societies  (Bruderladen)  were  associa- 
tions for  mutual  aid,  which  derived  their 
revenue  from  contributions  by  the  miners 
and  mine  owners,  and  sums  raised  by  a  tax  on 
the  raw  produce.  Such  associations  are  men- 
tioned as  early  as  the  end  of  the  thirteenth 
century.  The  Prussian  Code  of  1794  required 
that  two  shares  should  be  reserved  by  mining 
companies  for  the  benefit  of  the  sick  and  poor 
fund.  It  required  also  that  in  case  of  sick- 
ness, miners  were  to  receive  wages  for  the 
first  four  to  six  weeks,  after  which  they  were 
to  be  taken  care  of  by  the  friendly  society. 
The  friendly  societies  were  also  charged  with 
the  defraying  of  funeral  expenses,   with  the 

of  the  amount  stipulated,  or  pay  for  one,  two  or  four  months 
according  as  the  death  occurred  befoi-e  sailing,  on  the  voyage 
out,  or  on  the  return  voyage.  Domestic  servants,  who  con- 
tracted illness  as  a  result  of  their  work,  were  entitled  to  the 
support  of  their  employer  until  their  recovery,  ami  agricul- 
tural ]a])orers  and  their  ori)han  children  were  entitled  to  sup- 
port from  the  estate  to  which  they  were  attached. 


SAVINGS   AND   INSURANCE  109 

support  of  the  permanently  disabled,  and  of 
the  widows  and  orphans  of  deceased  members. 
At  first  these  associations  were  voluntary,  but 
the  managers  of  all  mines,  blast  furnaces, 
smelting  works  and  salt  works  belonging  to 
the  Prussian  state,  were  required  to  provide 
for  them  by  a  law  of  1854.  First  under  the 
direction  of  the  employers  they  gradually 
came  under  the  joint  control  of  employers  and 
employees,  and  they  were  supported  by  regu- 
lar contributions,  the  employers  being  required 
to  give  at  least  half  as  much  as  their  em- 
ployees. 

The  tendency  to  remove  restrictions  upon 
industry  and  to  release  employers  from  re- 
sponsibility during  the  second  and  third  quar- 
ters of  the  present  centur}^,  resulted  in  a 
heavy  burden  upon  the  communes  for  the 
support  of  the  poor.  Relief  was  sought  first 
in  the  investment  of  the  localities  with  extra- 
ordinary power,  in  the  provisions  of  the  In- 
dustrial Code  of  1845  which  permitted  the 
communes  to  require  all  workmen  to  subscribe 


110  SAVINGS    INSTITUTIONS 

to  provident  funds;  and  in  1849  they  were 
given  the  further  right  to  require  employers 
to  contribute  an  amount  equal  to  half  that 
paid  in  by  the  employees.  It  was  in  this  year 
also  that  the  important  provision  was  added 
permitting  advance  payments  by  employers 
on  behalf  of  their  employees  and  the  deduc- 
tion of  the  amount  from  their  wages.  And 
these  measures  applied  to  factory  owners  and 
operatives  as  well  as  to  artisans.  In  1854  pro- 
vision was  made  for  commercial  patronage,  i. 
e.,  contributions  to  the  funds  out  of  the  com- 
munal treasury. 

The  relief  offered,  however,  was  at  first  not 
readily  appropriated.  The  principle  of  joint 
contributions  aroused  such  antagonism  on  the 
part  of  the  employers  that  of  the  226  com- 
munes that  had  submitted  provident  fund 
statutes  for  approval  by  1853  all  but  fifty-eight 
depended  exclusively  upon  the  employees  for 
support.  The  public  partnership  arrangement 
seems  to  have  given  a  stronger  impetus  to  the 
movement,  and  by  1868  the  contributions  of 


SA.VINGS   AND  INSURANCE  111 

employers  to  the  factory  funds  in  the  old  pro- 
vinces amounted  to  35  per  cent  of  the  whole. 

A  system  of  insurance  funds  and  pensions 
for  the  benefit  of  employees  of  the  Prussian 
railways  was  inaugurated  as  early  as  1848, 
and  by  the  law  of  1859  two-thirds  of  the 
moneys  were  required  to  be  contributed  by 
the  men  and  the  remainder  by  the  railway 
fund. 

The  other  German  states  adopted  similar 
measures.  In  the  majority  compulsory  pro- 
vident associations  were  provided  for,  but  only 
in  a  few  instances  required.  Journeymen  and 
factory  workers  in  Saxony,  by  a  law  of  1862, 
amended  in  1868,  were  required  to  subscribe 
to  a  sick  and  burial  fund,  and  the  authorities 
might  organize  a  fund  and  include  all  persons 
who  were  not  members  of  voluntary  associa- 
tions. ^ 

After  the  formation  of  the  Empire  the  Im- 
perial Government  was  at  first  friendly  to  the 

^  Laws  of  similar  import  were  enacted  in  Thuringia,  Bruns- 
wick, Mecklenburg,  Hamburg  and  other  states. 


112  SAVINGS    INSTITUTIONS 

priQciple  of  voluntary  associations,  and  the 
Industrial  Code  of  1869  exempted  those  work- 
ingmen  from  the  requirement  to  become 
members  of  local  compulsory  associations, 
who  were  subscribers  to  any  other  fund.  The 
principle  of  state  control  was  advanced  a  step 
by  the  amendment  of  1876  allowing  the  work- 
ingmen  to  elect  between  the  local  compulsory 
fund  and  such  voluntary  funds  as  should  com- 
ply with  certain  legal  regulations ;  and  finally 
a  number  of  causes,  which  it  is  not  necessary 
here  to  relate,  induced  the  Imperial  Govern- 
ment to  enter  upon  a  programme  of  compul- 
sory insurance,  including  sick,  accident  and 
old-age  benefits.  1  The  law  was  passed  in 
1882,  and  amended  in  1885,  1886  and  1892, 
making  insurance  against  sickness  compulsory 
upon  persons  whose  occupations  could  place 
them  within  one  of  the  following  classes: 
First,  those  engaged  in  mines,  salt  works, 
factories,    blast    furnaces,    transportation   by 

^  Lexis,    Ilandwdrterbuch    der    St(uitKinHneiu<ichaftcn,    vol.    1. 
Art.     ArbeiterTersicJierung  (Deutschland),  Honigmann. 


SAVINGS  AND   INSURANCE  113 

rail  or  by  boat,  dockyards,  buildings,  etc. 
Second,  persons  engaged  in  commerce  or  han- 
dicraft. Third,  clerks  in  lawyer's  offices  and 
law  courts  and  in  the  employ  of  insurance 
companies.  Fourth,  industries  using  steam 
as  a  motive  power.  Fifth,  persons  engaged 
in  the  postal  or  telegraph  service  and  engaged 
in  the  naval  or  military  administration. 

The  organization  provided  is  local  in  its  ad- 
ministration and  the  management  is  along, 
business  lines.  The  state  control  is  vested  in 
the  Imperial  Insurance  Office,  which  exercises 
the  right  of  control  over  the  different  classes 
of  funds,  and  also  the  right  of  dissolving  an 
association,  either  when  the  rules  have  been 
violated,  or  when  the  membership  is  too 
small  to  insure  the  safety  of  the  funds.  ^ 

1  The  benefits  include:  Free  medical  aid  and  an  allowance 
during  sickness,  and  in  some  societies  an  allowance  during  tile- 
confinement  of  the  wife  of  a  member,  and  funeral  expenses 
in  case  of  the  death  of  a  member,  or  any  of  his  family.  The 
allowance  begins  on  the  fourth  day  after  the  beginning  of  the 
illness  and  continues  throughout  the  illness.  It  is  usually 
fifty  per  cent  of  the  daily  wage.  The  general  rule  governing 
contributions  is  that  two-thirds  is  paid  by  the  persons  insured 
and  one-third  by  the  employers,  and  the  amount  is  usually 


114  SAVINGS    INSTITUTIONS 

The  scheme  of  accident  insurance  adopted 
in  1884,  and  amended  a  number  of  times 
since,  imposes  no  burden  upon  the  employees, 
but  protects  the  workmen  against  loss  on  ac- 
count of  injuries  not  intentionally  self-caused. 
Seventy-five  per  cent  of  the  expenses  is  borne 
by  the  employers  and  twenty -five  per  cent  by 
the  state,  and  all  employers  are  obliged  to 
insure  their  workmen,  and  members  of  their 
clerical  staff,  whose  incomes  do  not  exceed 
2,000  marks  a  year,  against  accidents  incident 
to  their  employment,  the  only  exceptions  be- 
ing in  favor  of  employers  of  fishermen,  art- 
isans, domestic  servants,  messengers  and 
traveling  salesmen.  In  order  to  carry  out  the 
spirit  of  the  law,  employers  in  an  industry  are 
obliged  to  unite  for  the  organization  of  an  in- 
surance association.  There  may  be  a  number 
of  such  associations  in  a  single  trade,  or  there 

one  and  a  half  per  cent  of  the  daily  wage,  one  per  cent  being 
paid  by  the  workmen  and  one-iialf  per  cent  bj''  the  employer. 
See  Lexis,  Ilandworterhuch  der  Stmitmssenschafteii  Vol.  IV. 
Art.  Krankenversicherung ;  van  der  Borght:  Workmen's  In- 
surance of  the  German  Empire. 


SAVINGS   AND   INSURANCE  115 

may  be  but  one,  with  its  branches  extending 
throughout  the  Empire,  as  in  the  case  of  the 
mining  industry,  but  the  rules  adopted  are 
always  subject  to  the  approval  of  the  Imperial 
Insurance  office. 

The  care  of  a  person  disabled  by  accident, 
devolves  upon  the  sick  funds  to  which  he  is  a 
subscriber,  if  the  disability  continues  only  for 
thirteen  weeks.  After  that  the  accident  in- 
surance fund  must  provide  medical  attendance 
and  allowance  during  the  term  of  the  disabil- 
ity, including  the  first  thirteen  weeks,  equal 
to  two-thirds  of  his  average  daily  wage.  In 
case  of  death,  the  funeral  expenses  are  pro- 
vided for  by  a  sum  equal  to  twenty  days  pay, 
and  the  widow  receives  during  her  widowhood 
twenty  per  cent  of  the  amount  of  her  hus- 
band's wages,  and  each  child  under  fifteen 
years  of  age  is  allowed  fifteen  per  cent,  where 
one  parent  is  living,  and  twenty  per  cent  when 
both  are  dead.  ^ 

^  See  Pafiferoth,  "  Fultrer  durch  die  Gesammte.  Arbeiterver- 
sicJierung."  Lexis,  Haiulwdrterhuch  der  Staatsiousenscltaften. 
Vol.  V.  Art.  ''Unfallversicheruno"  Ziecher. 


116  SAVINGS    INSTITUTIONS 

The  third  feature  of  the  general  scheme,  the 
invald  and  old  age  insurance,  was  not  added 
until  1891.  This  includes  all  persons  over  six- 
teen years  of  age  who  are  working  for  a 
pecuniary  remuneration.  This  is  necessarily 
more  of  a  government  institution  than  either 
of  the  other  two.  The  supreme  authority  i& 
here  vested  in  a  Federal  Council  and  the  Im- 
perial Insurance  office,  and  the  active  admin- 
istrative work  is  allotted  to  district  insurance 
institutes.  Old  age  pensions  must  be  preceded 
by  at  least  twenty-seven  contributory  years ; 
but  years  spent  in  military  service  or  years  of 
sickness  are  not  deducted  from  the  required 
contributory  period.  An  invalid  pension  must 
be  preceded  by  five  contributory  years.  A 
contributory  year  in  either  case  is  reckoned  at 
forty- seven  weeks,  allowance  being  made  for 
sickness. 

The  amount  of  the  pension  depends  upon 
the  amount  of  the  contributions  made,  and  it 
ranges  between  about  twenty-five  and  forty 
dollars.     It  is  not  meant  to  furnish  a  compe- 


SAVINGS   AND   INSURANCE  117 

tence,  and  hence  it  is  not  a  sure  refuge  against 
pauperism.  The  funds  are  suppUed  by  the 
employers,  the  employees  and  the  state,  the 
first  two  contributing  equal  amounts  and  the 
state  granting  a  subsidy  of  fifty  marks  for 
each  case.  The  contributions  are  made  in  all 
cases  by  a  system  of  stamp  cards,  each  card 
containing  forty-seven  spaces,  one  for  each 
week  in  a  contributory  year.  The  cards  are 
obtained  and  the  stamps  are  purchased  by  the 
employer  at  the  local  post-oflfice,  and  the 
amount  is  pasted  in  each  week,  one-half  being 
deducted  from  the  wages.  ^ 

The  latest  step  in  the  direction  of  state  insur- 
ance is  the  old  age  pension  scheme  of  New  Zea- 
land. This  law  guarantees  a  minimum  income 
of  ninety  dollars  a  year  to  any  persons  sixty-five 
years  of  age  or  older,  who  have  resided  for 
twenty-five  years  in  the  colony,  and  whose 
incomes  from  other  sources  do  not  exceed  one 

^For  a  complete  account  see  Lexis;  ''  Handworterbuch  der 
Staatswissenschaften,  Vol.  IV.  Art.  Invaliditdts  und  Alterver- 
siclierung :  v.  Woedtke  ;  and  "The  State  and  Pensions  in  Old 
Age",  Spender. 


118  SAVINGS    INSTITUTIONS 

hundred  and  seventy  dollars  per  year.  When 
private  incomes  exceed  this  the  amount  of  the 
pension  is  lessened  by  one  pound  for  every 
additional  pound  of  private  income,  and  at 
this  rate  of  reduction  persons  having  inde- 
pendent incomes  of  two  hundred  and  sixty 
dollars  a  year  will  receive  no  pension.  The 
possession  of  property  to  the  extent  of  $1,625 
does  not  exclude  one  from  the  pension,  but  in 
case  the  amount  of  property  exceeds  this  sum, 
the  pension  is  proportionately  less  until  it  dis- 
appears at  $3,000.1 

A  still  more  radical  departure  is  the  Swiss 
movement  in  the  direction  of  insurance 
against  involuntary  idleness.  The  precarious- 
ness  of  employment  under  the  factory  system 
is  bringing  into  prominence  both  the  question 
of  the  ethics  of  enforced  idleness  and  various 
schemes  for  providing  against  its  effects.  ^  All 
phases  of  culture  in  providence  aim  to  provide 

1  National  Review,  Feb.,  1899.  Art.  by  W.  Pember  Reeves, 
Attorney-General  for  New  Zealand. 

=^  Arena,  Feb.,  1899,  Art.  "  The  Right  to  Work."  Commons. 


SAVINGS  AND   INSURANCE  119 

against  the  harsh  incidents  of  unemployment, 
but  it  is  now  proposed  to  apply  the  insurance 
principle  directly  to  the  solution  of  this  most 
vexed  problem. 

It  is  proposed  on  the  one  hand,  simply  to 
afford  facilities  for  such  protection,  to  esti- 
mate risks  and  offer  guarantees  according 
to  conservative  insurance  principles,  and  on 
the  other  to  make  such  provision  obligatory 
upon  persons  whose  situation  in  life  would 
probably  expose  them,  or  their  families,  to 
suffering  in  case  of  loss  of  employment.  In 
either  case  the  administration  is  under  the 
public  management  or  patronage.  The  prin- 
ciple has  first  taken  root  in  Berne,  where  a 
purely  mutual  and  voluntary  association  was 
organized  in  1893,  which  has  since  been  pat- 
ronized by  the  municipality  in  the  way  of  an 
annual  subsidy  of  3,000  francs,  which,  it  is 
estimated,  would  otherwise  be  expended  for 
direct  charity.  The  membership  has  come 
largely  from  the  building  trades,  owing  to  the 
unusual    precariousness    of    employment    in 


120  SAVINGS    INSTITUTIONS 

them.  The  burden  imposed  in  the  way  of 
dues  does  not  seem  to  be  severe,  they  being 
only  forty  centimes  a  month,  or  less  than  a 
dollar  a  year.  Members  having  paid  their 
dues  for  a  period  of  six  months  from  the  be- 
ginning of  their  membership  are  entitled  to 
the  benefits  upon  presentation  of  proof  that 
they  are  out  of  employment  through  no  fault 
of  their  own.  The  insured,  if  a  bachelor,  has 
the  privilege  of  drawing  a  franc  a  day,  and  if 
married,  a  franc  and  a  half. 

At  the  end  of  the  first  year  out  of  404  sub- 
scribers, 216  claimed  to  be  without  work,  fifty 
found  work  within  a  week,  and  the  remain- 
ing 166  received  help. 

The  Grand  Council  of  the  Canton  of  Saint 
Oall  passed  a  statute  in  1894  authorizing  com- 
munes, either  singly  or  in  groups,  to  make  this 
class  of  insurance  compulsory.  When  it  was 
adopted,  the  compulsion  was  to  extend  to  all 
male  wage  earners  whose  wages  should  not 
average  more  than  five  francs  a  day ;  mem- 
bership was  not  to  be  obligatory  upon  persons 


SAVINGS   AND   INSURANCE  121 

whose  wages  exceeded  that  amount,  but  they 
might  join  if  they  chose.  The  weekly  dues 
were  to  be  fifteen  centimes  for  members  re- 
ceiving three  francs  or  under,  per  day,  twenty 
centimes  for  those  receiving  from  three  to  four 
francs,  and  thirty  centimes  for  those  receiving 
more  than  four  francs.  The  benefits  were  to  be 
1. 80  francs,  2. 10  francs  and  2.40  francs  respect- 
ively a  day,  but  they  could  not  extend  for  a  long- 
er period,  in  a  single  year,  than  sixty  days ;  and 
no  one  could  receive  them,  who  had  not  paid 
his  dues  without  interruption  for  a  period  of  six 
months.  It  was  not  sufficient  to  prove  lack 
of  employment,  but  proof  was  also  required 
that  the  loss  of  employment  was  not  the  re- 
sult of  a  strike  or  of  any  fault  of  the  appli- 
cants, and  that  for  five  days  he  had  been  un- 
able to  find  other  employment.  It  was  also  a 
part  of  the  scheme  to  find  employment  for 
members;  and  a  failure  to  accept  it  when  found, 
would  disqualify  a  member  for  receiving  the 
benefits.  A  district  organization  was  formed 
under  this   provision,    by   three    communes, 


122  SAVINGS    INSTITUTIONS 

comprising  3,000  members.  It  proved  to  be 
successful  in  a  financial  way,  but  owing  to 
dissatisfaction  among  the  members,  it  was 
discontinued  in  1897.  It  was  complained  that 
persons  out  of  employment  would  relax  their 
efforts  to  find  work  while  receiving  the  pen- 
sion. Those  who  received  no  benefits  felt  ag- 
grieved at  having  to  bear  the  burdens  imposed 
by  the  situation  of  their  less  fortunate  breth- 
ren, and  those  who  were  engaged  in  relatively 
secure  work  were  particularly  bitter  in  their 
complaints.  Evidence  of  the  dissatisfaction 
was  found  in  the  difficulty  of  compelhng 
membership,  there  being  no  less  than  150  con- 
victions, during  the  first  year,  of  persons  who 
failed  to  respond  to  the  summons  to  enroll. 

A  better  matured  programme  to  the  same 
purpose  has  been  worked  out  for  the  city  of 
Basel  by  Prof.  M.  Adler  of  the  University  of 
Basel.  This  provides  that  all  masons,  exca- 
vators and  all  workingmen,  not  subject  to  the 
factory  laws,  who  do  not  earn  more  than  2,000 
francs  a  year,  with  some  unimportant  excep- 


SAVINGS  AND   INSURANCE  123 

tations,  must  be  insured  against  unemploy- 
ment, but  they  may  elect  to  join  a  voluntary 
association.  The  insured  are  classified  accord- 
ing to  risk,  into:  first,  factory  employees; 
second,  employees  in  the  building  trades  who 
are  least  subject  to  unemployment ;  and  third, 
employees  in  other  building  trades.  Members 
of  these  classes  are  sub-classified  according  to 
earnings  into :  first,  those  who  received  fifteen 
francs  or  under  per  week ;  second,  those  whO' 
receive  from  fifteen  to  twenty-four  francs; 
and  third,  those  who  receive  more  than 
twenty-four  francs.  The  weekly  contribu- 
tions are,  for  the  first  class,  ten,  fifteen,  and 
twenty  centimes,  for  the  second,  twenty^ 
thirty  and  fifty  centimes,  and  for  the  third, 
thirty,  forty-five  and  sixty  centimes.  The 
employers  also  contribute  ten  centimes  per 
week  for  workmen  belonging  to  the  first 
class,  and  twenty  centimes  for  those  belong- 
ing to  the  second  and  third.  The  part  which 
the  city  takes  is  to  assume  all  expenses  and 
guarantee  a  subsidy  of  25,000  francs  a  year. 


124  SAVINGS    INSTITUTIONS 

The  benefits  vary  from  eighty  centimes  to 
two  francs  a  day.  ^ 

A  similar  institution  was  organized  in  Col- 
ogne in  1896  under  municipal  management. 
Membership  in  this,  however,  is  purely  volun- 
tary. A  voluntary  organization  also  exists  in 
Bologna  among  employees  in  building  trades. 

There  is  much  to  be  said  in  favor  of  insurance 
associations  in  their  bearings  upon  economic 
and  social  life,  but  viewed  simply  as  institu- 
tions for  cultivating  providence  they,  at  their 
best,  come  far  short  of  the  highest  ideals,  and 
at  their  w^orst,  they  must  be  set  down  as 
vicious.  The  associations  in  which  member- 
ship is  voluntary  are  the  only  ones  which  can 
claim  to  cultivate  the  saving  habit.  These 
direct  the  mind  to  the  principle  of  providing 
against  the  future  in  the  most  concrete  way. 
Indeed  the  very  names  by  which  they  are  des- 
ignated, i.  e.,  insurance  associations,  provi- 
dent societies,  etc.,  must  have  an  educative 
influence,  and  the  periodicity  of  payments  in- 

^  Musee  Social,  Bulletin  2,  Series  B. 


SAVINGS  AND  INSURANCE  125 

culcates  regularity  in  laying  by.  On  the 
other  hand  there  may  be  a  dangerous  com- 
pleteness about  the  scheme.  When  a  man 
has  satisfied  his  conscience  in  the  matter  of 
protecting  his  family  against  the  future,  he  is 
in  danger  of  settling  down  to  a  slothful  con- 
tentment as  to  everything  else.  A  state  of 
mental  lassitude  is  all  the  more  likely  in  as 
much  as  the  investor  in  the  insurance  funds 
has  no  concern  about  its  administration.  He 
places  himself  under  the  trusteeship  of  a 
company  in  Mrhich  he  has  confidence,  and  he 
is  never  even  consulted  about  the  administra- 
tion of  his  property.  It  is  a  system  requiring 
an  implicit  trust,  which  cannot  promote  vig- 
orous self-reliance. 

Furthermore,  insurance  leans  in  the  direc- 
tion of  an  immobile,  stratified,  industrial  order, 
because  the  inducement  to  save  for  future 
spending  is  opposed  to  the  principle  of  mak- 
ing saving  a  stepping  stone  to  the  ownership 
of  capital.  The  owner  of  a  hfe  policy  may 
be  considered,  in  a  restricted  sense,  a  capitalist. 


126  SAVINGS    INSTITUTIONS 

But  this  kind  of  capitalism  represents  the  form 
without  its  individual  animation.  It  involves 
no  conscious  change  of  industrial  status  and 
it  creates  no  new  fund  of  industrial  energy  in 
the  investor.  It  does  not  include  that  better- 
ment of  condition  which  the  world  calls 
"  social  advancement  " — one  of  the  most  pow- 
erful stimulants  to  industry  and  providence. 

Again  it  must  be  said  that  the  most  whole- 
some spending  is  not  promoted  by  insurance. 
This  is  not  saying  that  it  may  not  improve  the 
spending  habits,  but  it  does  lack  the  brace  of 
a  wholesome  industrial  ambition.  The  ambi- 
tion to  impart  a  pleasing  and  orderly  aspect  to 
the  home,  the  ambition  to  become  the  owner 
of  a  home  and  a  garden  which  will  appeal  to 
the  sense  of  beauty,  and  the  like,  are  the 
surest  guides  to  wholesome  expenditures,  and 
the  insurance  dues  are  an  obstacle  in  the  way 
of  realizing  them. 

Compulsory  insurance  societies  ought  not  to 
be  called  provident  institutions,  unless  the 
term  is  applied  to  the  state,  or  to  society.     It 


SAVINGS   AND   INSURANCE  127 

is  a  way  by  which  the  state  protects  its  citizens 
against  themselves,  as  well  as  itself  against 
the  support  of  the  improvident,  and  it  may 
protect  society  against  mendicancy  and  law- 
lessness. But  it  is  opposed  to  every  principle 
of  self  provision.  It  is  better  than  undis- 
guised charity  in  that  it  does  not  humiliate  the 
recipients  to  the  same  extent.  The  receipt  of 
such  a  pension,  however,  marks  the  recipient 
as  a  member  of  a  certain  class.  If  this  stig- 
ma should  be  removed  by  conferring  pensions 
upon  aU  for  old  age,  for  physical  or  mental 
disability,  or  by  requiring  aU  to  be  insured, 
somewhat  in  proportion  to  their  premium 
paying  capacity,  it  would  naturally  result  in 
a  more  or  less  general  relaxation  of  economic 
effort.  The  spirit  of  voluntary  providence 
generally  induces  a  superior  alertness,  and  a 
greater  fidelity  to  work,  but  compulsory  pro- 
vidence is  mechanical  and  spiritless. 

A  financially  successful  system  of  com- 
pulsory insurance  will  lay  no  obligation  upon 
the  wage  earner.     His  dues  wiU  be  levied  up- 


128  SAVINGS    INSTITUTIONS 

on  before  his  wages  have  reached  his  hand  and 
he  will  in  reality  not  realize  that  he  is  paying 
anything.  He  will  count  as  wages  what  he 
actually  receives  and  the  insurance  benefits 
will  come  to  be  regarded  as  of  the  nature  of  a 
pension  provided  for  by  a  tax  upon  his  em- 
ployer. And  if  the  principle  is  ever  extended 
so  as  to  mean  actual  insurance,  i.  e. ,  a  support 
when  labor  for  any  cause  fails,  a  chief  disci- 
pline in  the  interest  of  wholesome  living  will 
be  removed. 


CHAPTER  IV 

BUILDING   AND   LOAN   ASSOCIATIONS 

Building  and  Loan  Associations,  which  have 
had  their  chief  vogue  in  the  United  States, 
are,  properly  speaking,  a  species  of  savings 
bank, — not  unlike  in  spirit  to  the  co-operative 
savings  banks  of  Germany,  and  almost  identi- 
cal in  form  with  the  Italian  development  of 
this  system.  The  borrowing  and  lending  mo- 
tives combine  for  their  support — some  subscribe 
to  stock  with  the  purpose  of  collective  lend- 
ing, and  others  with  the  purpose  of  individual 
borrowing  from  the  collectivity.  Collective 
borrowing  never  enters  into  their  functions. 
This  double  motive  brings  into  association  two 
distinct  classes — the  propertyless  and  the  prop- 
erty owners.  The  co- existence  of  both  these 
elements  in  a  building  society  is  essential  to  its 
practical  working,  and  it  is  no  less  essential 
to  the  accomplishment  of  the  economic  ideal 

(129) 


130  SAVINGS    INSTITUTIONS 

in  view,  i.  e. ,  the  ideal  of  proprietorship.  The 
simple  process  of  realizing  proprietorship  is 
clearly  outlined  in  the  rules  printed  in  the 
back  of  the  pass-book.  In  so  far  as  the  asso- 
ciation is  concerned,  the  steps  leading  to  this 
end  consist :  first,  in  what  practically  amounts 
to  lending  to  the  association,  in  the  form  of 
dues;  and  secondly,  in  borrowing  from  the 
association.  Of  course,  the  member  knows 
that  he  must  take  alone  the  intermediate  step, 
i.  e.,  the  investment  of  his  savings  in  some 
form  of  real  property  as  a  basis  for  credit. 
The  complete  scheme  of  economic  education 
involved  consists,  first,  in  starting  the  un- 
tutored laboring  man  with  one  share  of  stock 
requiring  a  small  weekly  payment ;  and,  after- 
wards, through  precept  and  example,  gradu- 
ally instiUing  into  his  consciousness  an  aspira- 
tion for  the  more  substantial  good  things  of 
life,  and  showing  him  how  his  aspiration  may 
be  realized.  The  new  member  meets  people 
in  all  stages  of  this  process  of  education  at  the 
weekly  deposit  meeting.     A  pedagogy  is  here 


BUILDING   AND   LOAN   ASSOCIATIONS        131 

supplied  which  is  adapted  to  the  separate 
needs,  and  every  member  present,  who  has 
made  any  progress,  is  an  eager  volunteer  in- 
structor. The  instructon  is  likely  to  be  im- 
parted in  a  concrete  form,  calculated  to  reach 
the  understanding  of  the  pupil, — and  the 
efficiency  of  the  instruction  demands  that 
different  stages  of  progress  be  represented  in 
the  membership,  from  the  man  who  can  point 
to  his  neat  cottage  and  explain  how  its  con- 
ception and  its  birth  proceeded  from  a  sub- 
scription to  one  share  of  stock,  to  be  paid  for, 
perhaps  at  the  rate  of  twenty-five  cents  per 
week,  down  to  the  man  who  can  point  to 
twenty-five  or  fifty  dollars  credited  on  his 
books.  A  common  starting  point  for  such  in- 
struction is  a  comparison  of  books  at  the 
weekly  meeting.  Every  payment  is  entered, 
and  in  a  way  to  enable  the  reader  to  tell  at  a 
glance  whether  the  owner  is  credited  with  one 
or  more  shares;  and  whether  he  is  just  begin- 
ning and  has  but  a  few  dollars  to  his  credit,  or 
if  his  shares  are  well  on  towards  maturity. 


132  SAVINGS    INSTITUTIONS 

The  principle  of  building  associations  had 
an  upper  class  origin,  ^  but  it  was  so  ingen- 
iously contrived  as  not  to  call  for  an  upper 
class  execution.  In  this  respect  it  differed 
from  the  trustee  savings  banks.  These  were 
beginning  to  discover  their  limitations  when 
building  associations  were  first  started,  which 
may  have  suggested  what  might  be  called  the 
automatic  feature  of  the  latter.  When  once 
well  started  the  principle  was  expected  to  run 
itself.  That  is,  after  the  initiation  of  the 
principle  and  its  practical  demonstration,  it 
was  expected  to  work  out  its  future  salvation 
without  any  paternal  oversight ;  the  appeal  to 
self-interest  was  thought  to  be  strong  enough 
to  induce  the  proper  citizens  to  organize  them- 
selves into  a  society. 

^  The  Earl  of  Suffolk  is  credited  with  the  authorship  of  the 
idea,  and  he  is  accorded  the  distinction  of  being  the  first  to 
test  its  efficacy  tlirough  experiment,  for  the  first  building 
association  is  said  to  have  been  establislied  by  him  in  Kircud- 
bright, in  the  soutli  of  Scotland.  Tiie  idea  gradually  spread 
into  England  and  Wales,  and  throughout  Great  Britain,  until 
in  1S51  the  total  number  of  building  societies  had  reached 
2,050,  with  an  annual  income  of  about  four  million  pounds. 


BUILDING   AND   LOAN   ASSOCIATIONS        133 

The  prime  requisite  is  knowledge  of  the 
methods  of  procedure  and  of  the  benefits  to 
be  derived,  and  this  is  one  reason  why  the  in- 
stitution is  Ukely  to  be  highly  localized.  Build- 
ing societies  are  more  likely  to  thrive  in  the 
city  than  in  the  country,  and  most  likely  to 
thrive  in  those  cities  where  a  strong  social  ele- 
ment exists,  especially  where  there  is  a  large 
German  population.  For  example  in  the  state 
of  Ohio  there  were,  in  1897,  761  building  soci- 
eties; and  almost  half  of  these,  or  349,  were 
located  in  Hamilton  County,  and  nearly  all  of 
these  were  in  the  city  of  Cincinnati  and  its 
suburbs.  Ten  counties  of  the  state  in  1893 
had  each  only  one  building  association.  In 
order  to  understand  the  significance  of  this  we 
need  to  recall  that  the  ideal  building  society  is 
a  neighborhood  affair  and  within  easy  walking 
distance  of  the  homes  of  the  great  majority 
of  the  members.  As  the  knowledge  of  the 
advantages  spreads  from  neighborhood  to 
neighborhood  new  societies  are  organized. 

The  initial  step  is  likely  to  be  taken  by  some 


134  SAVINGS    INSTITUTIONS 

person  in  the  neighborhood  who  has  an  un- 
usual interest  in  it ;  perhaps  a  bright  young 
book-keeper  who  hopes  to  be  rewarded  for  his 
efforts  by  an  election  to  the  office  of  secretary, 
and  to  have  the  two  or  three  dollars  per  week 
salary  added  to  his  present  income ;  ^  or  it  may 
be  a  neighborhood  merchant,  or  a  saloon-keeper 
who  offers  the  use  of  a  room  adjoining  his 
premises,  or  a  back  parlor,  for  the  meetings  of 
the  association  with  the  expectation  of  attract- 
ing a  larger  custom  to  the  store  or  to  the 
saloon.  2 

It  perhaps  more  often  happens  in  the  United 
States  that  the  prime  mover  is  a  lawyer,  who 

1  The  inducemeuts  to  organize  associations  are  sometimes- 
strong  enough  to  produce  them  in  excess  of  their  need.  The 
city  of  Cincinnati  has  been  much  overworl<ed,  resulting  in 
considerable  losses.  Between  1893  and  1898  the  total  number 
declined  from  371  to  359,  and  the  number  is  still  in  excess  of 
the  demand. 

^  In  the  city  of  Cincinnati,  the  meetings  of  the  board  are 
held,  in  the  large  majority  of  cases,  in  a  room  connected  with 
a  drinking  place,  and  there  is  a  very  gcnei'al  practice  of  the 
members  taking  turns  in  treating  each  other  after  the  business 
of  the  evening  has  been  dispatched.  The  weekly  meetings 
are  thus  apt  to  develop  into  friendly  visits,  to  the  greater  or 
less  profit  of  the  proprietor  if  he  is  a  dispenser  of  drinks  or 
tobacco. 


BUILDING   AND   LOAN   ASSOCIATIONS        135 

is  seeking  to  build  up  a  practice  in  land  titles 
and  incidentally  to  cultivate  a  small-class 
clientage.  If  he  is  largely  instrumental  in 
effecting  the  organization,  he  will  expect  to 
be  elected  to  the  position  of  attorney.  ^ 

The  method  usually  followed  is  for  the  law- 
yer to  select  as  his  aids  a  neighborhood  mer- 
chant or  saloon  keeper  who  can  furnish  the 
room  for  meeting  purposes,  and  the  young 
book-keeper  who  would  like  to  be  made  secre- 
tary, and  to  furnish  them  with  stock  subscrip- 
tion blanks,  ^^^len  a  sufficient  amount  of 
stock  has  been  subscribed  a  meeting  is  called, 
formal  resolutions  are  passed,  after  which 
speeches  are  made  and  perhaps  some  drinking 
is  done  to  mellow  the  organization  at  the  initial 
stage  (it  is  understood  that  it  is  in  a  German 
neighborhood).  At  the  next  meeting  directors 
are  chosen  and  everything  is  in  readiness  for 
receiving  the  payment  of  dues. 

'  The  author  has  known  of  one  firm  acting  as  attorney  for 
about  twenty  building  associations,  each  member  of  the  firm 
attending  the  meetings  of  one  or  more  associations  on  every 
evening  of  the  week. 


136  SAVINGS    INSTITUTIONS 

It  would  be  a  mistake  to  say  that  the  selfish 
motive  is  the  only  one  which  enters  into  the 
organization  of  the  society,  for  neither  the 
merchant  nor  the  saloon  keeper  nor  the  aspir- 
ant to  the  office  of  secretary  is  moved  entirely 
by  a  selfish  motive.  In  the  case  of  the  mer- 
chant or  saloon  keeper,  the  increase  of  custom 
is  not  the  only  compensation  received,  but 
there  is  a  certain  enjoyment  derived  from  hav- 
ing one's  place  a  common  center  of  the  social 
life  of  the  community,  and  a  certain  air  of 
substantiality  and  respectability  surrounds  the 
meeting  place  of  the  building  society.  The 
book-keeper  also  finds  other  compensations 
than  the  two  or  three  dollars  per  week  re- 
ceived for  his  clerical  services.  He  enjoys  the 
little  neighborhood  distinction  attaching  to  his 
office,  and  he  also  enjoys  the  social  contact  at 
the  weekly  meetings  with  his  more  substan- 
tial neighbor.  ^ 

The  subscribers  to  stock  are  also  moved  to 

*  The  lawyer  may  have  oaly  the  economic  or  the  professional 
motive,  for  he  may  not  be  a  resident  of  the  neighborhood. 


BUILDING   AND   LOAN   ASSOCIATIONS        137 

some  extent  by  the  social  motive.  The  weekly 
visit  to  the  association  meeting  is  apt  to  be  a 
pleasure  instead  of  a  hardship,  for  it  is  often 
an  occasion  for  a  social  chat  and  exchanges  of 
friendly  greeting.  Thus,  while  the  economic 
motive  suppUes  the  chief  driving  energy  to 
the  machine,  its  easy  movement  may  be  facili- 
tated by  the  oil  of  friendly  neighborhood  in- 
tercourse. 

The  most  brilliant  results  have  been  achieved 
in  America,  and  there  are  evident  reasons  why 
this  country  should  be  peculiarly  congenial  to 
its  success.  Chief  among  them  is  the  fact 
that  there  is  an  unusually  large  demand  for 
small  loans  here ;  and  this  is  true  in  part  be- 
cause of  the  higher  wage  scale,  and  in  part 
because  of  the  more  lively  traffic  in  real  es- 
tate, and  because  the  appetite  for  home  owner- 
ship is  whetted  by  advertisements  and  solicita- 
tions. Another  reason  is  found  in  our  large 
German  population,  which  so  largely  consti- 
tute their  patronage.  A  great  many  of  these 
have  received  a  training  for  that  sort  of  an 


138  SAVINGS    INSTITUTIONS 

institution  in  the  co-operative  banks  in  the 
fatherland. 

The  first  building  society  of  America  was 
established  in  the  county  of  Philadelphia 
about  1840.  The  large  German  element  in 
Pennsylvania  perhaps  did  most  to  make  the 
conditions  favorable  for  a  healthy  growth,  and 
especially  in  the  larger  cities.  The  principle 
of  building  societies  has  since  been  introduced 
in  some  form  in  every  state  and  territory  in 
the  Union,  but  it  has  been  largely  successful 
in  only  a  few  states  and  in  these  few  Pennsyl- 
vania still  stands  at  the  head.  At  the  time  of 
the  special  study  of  the  subject  by  the  United 
States  Bureau  of  Labor,  the  reports  from 
Pennsylvania  showed  a  total  of  233,655  share- 
holders for  the  state.  Ohio  came  in  as  a  close 
second  with  233,348.  ^     The  reports  from  the 


1  The  following 

from  the 

last  reports  indicates  the  later 

growth  in  Ohio: 

Year     Associations 

Membership 

Shares 

Assets 

1898           768 

297,803 

1,469,690 

$101,089,277.06 

1897           761 

297,787 

1,435,885 

99,770,161.07 

Increase     7 

10 

33,705 

$1,319,115.99 

BUILDING   AND   LOAN   ASSOCIATIONS        139 

other  states  did  not  indicate  much  strength. 
Some  of  the  higher  records  were :  New  Jersey, 
85,698;  Maryland,  52,410;  Missouri,  50,083; 
lUinois,  134,380;  New  York,  110,990,  and  In- 
diana, 93,132.  Some  of  the  very  low  records 
were:  Kansas,  7,265;  Louisiana,  7,166;  Con- 
necticut, 3,222;  Alabama,  3,882;  Nebraska, 
7,675;  Mississippi,  5,299;  Nevada,  211,  and 
Oklahoma,  142. 

The  very  low  rank  taken  in  this  kind  of 
work  by  the  New  England  states  may  be  ac- 
counted for  on  the  ground  of  the  extraordinary 
development  of  the  trustee  savings  bank.  In 
Pennsylvania  and  in  Ohio  the  building  asso- 
ciations take  the  place  of  savings  banks  to  a 
small  extent,  and  in  the  West  and  the  South 
the  same  causes  operate  to  prevent  their  suc- 
cess which  impede  the  growth  of  trustee  sav- 
ings banks.  ^ 

According  to  the  original  methods  of  pro- 
cedure, which  have  come  to  be  known  as  the 
Philadelphia  plan,  a  new  series  of  stock  be- 

^  See  chapter  on  Trustee  Savings  Banks. 


140  SAVINGS    INSTITUTIONS 

gins  each  year  at  the  same  time,  and  each 
share  in  the  series  matures  at  the  same  time. 
The  shares  are  paid  for  in  weekly  instalments, 
the  amount  of  each  being  determined  by  the 
nominal  value  of  the  share,  and  by  the  dura- 
tion of  the  shares.  We  must  note  here  the 
adaptability  of  the  scheme  to  all  sorts  and 
conditions  of  people,  for  the  weekly  payment 
on  a  share  may  be  one  dollar,  fifty  cents,  or 
even  as  low  as  twenty-five  cents,  according  to 
the  general  financial  condition  of  the  people 
in  the  neighborhood.  These  low  payments 
place  the  associations  within  reach  of  the  very 
poor  wage  earners  without  removing  them 
from  persons  in  better  circumstances,  for  the 
latter  may  increase  the  total  of  their  weekly 
deposits  by  subscribing  to  a  greater  number 
of  shares. 

Persons  may  become  members  in  the  course 
of  the  year  after  the  series  has  commenced  by 
paying  up  the  back  dues.  This  rule  is  per- 
haps the  weakest  point  in  the  original  scheme. 
According  to  it  the  only  way  in  which  the  very 


BUILDING   AND   LOAN  ASSOCIATIONS        141 

poor  may  be  gathered  in  is  to  get  them  started 
at  the  beginning  of  a  series,  for  while  they 
could  pay  twenty-five  cents  or  fifty  cents  per 
week,  down,  to  pay  four  or  five  dollars  in  a 
lump  sum  would  be  quite  beyond  them.  A 
remedy  for  this  forms  a  part  of  what  has 
come  to  be  known  as  the  Dayton  Plan,  which 
consists  in  the  abandonment  of  the  general 
series  plan  and  the  adoption  in  its  stead  of  a 
form  of  individual  series.  That  is,  a  person 
may  join  the  association  at  any  time  during 
the  year,  and  his  stock  will  begin  to  mature 
and  to  earn  dividends  from  that  date. 

Another  feature  of  the  original  scheme, 
which  is  still  generally  in  vogue,  is  the  plan 
of  periodical  payment  of  dues,  accompanied 
by  the  imposition  of  fines  for  deUnquencies. 
This  provision  is  calculated  to  keep  the  mem- 
ber alert  to  his  obligations  to  the  association 
and  to  cause  him  to  guard  carefully  the 
amount  of  his  wages  designed  for  this  use  un- 
til they  have  been  deposited.  This  is  the  most 
effective  inducement  to  regularity  and  method 


142  SAVINGS    INSTITUTIONS 

in  saving.  The  Dayton  system  has  aban- 
doned this  provision  and  allows  each  member 
the  benefit  of  whatever  his  payments  actually 
earn.  ^  But  this  seems  to  be  an  abandonment 
of  the  most  essential  building  society  princi- 
ple. The  savings  habit  under  this  rule,  is  apt 
to  become  irregular  and  spasmodic,  and  the 
plan  may  place  the  association  at  a  disad- 
vantage in  calculating  the  time  for  making 
loans,  for  if  the  regular  habit  of  paying  dues 
is  abandoned,  directors  will  no  longer  be  able 
to  anticipate  funds. 

The  associations  are  likely  to  be  very  attract- 
ive for  a  number  of  reasons.  To  the  deposit- 
ing members  they  can  offer  an  unusually  high 
rate  of  interest,  because  of  the  great  economy 
of  administration  (the  board  of  directors  and 
aU  of  the  officers,  except  the  secretary,  attend 
the  weekly  meetings  and  contribute  their  ser- 
vices without  receiving  any  compensation,  and 

^  Set'  irpoit  Fourth  Annual  meeting  United  States  League 
of  Local  Building  and  Loan  Associations,  iiold  in  Philadelphia, 
1896.     Debate  between  .James  H.  Paist  and  Hufus  .Jones. 


BUILDING   AND   LOAN   ASSOCIATIONS        143 

there  is  usually  no  expense  for  rent ;  the  at- 
torney receives  compensation  for  his  services 
in  examining  and  reporting  on  titles  according 
to  terms  agreed  upon  with  the  association,  but 
he  is  usually  paid  by  the  person  Mrho  receives 
the  loan).  When  the  money  has  accumulated 
in  sufficient  amount,  a  sale  is  announced  for  a 
certain  meeting,  and  the  highest  bidder  re- 
ceives the  loan.  The  competition  is  often  quite 
lively,  and  as  a  result,  the  stock  of  building 
associations  has  in  times  past  yielded  dividends 
as  high  as  nine  or  ten  per  cent,  while  the  rul- 
ing rate  for  money  was  only  six  or  seven  per 
cent. 

And  it  is  claimed  that  the  building  associa- 
tion also  offers  extraordinary  inducements  to 
a  certain  class  of  money  borrowers,  lending 
small  amounts  on  more  favorable  terms  than 
they  could  obtain  elsewhere.  The  chief  ad- 
vantage to  the  borrower  consists  in  the  method 
of  repayment.  The  borrowers  make  their 
weekly  payments  the  same  as  other  members, 
but  the  essential  difference  between  the  two 


144  SAVINGS    INSTITUTIONS 

classes  consists  in  the  fact  that  the  borrowers 
are  clearing  their  property  from  encumbrance 
while  the  others  are  accumulating  money  to 
invest  in  property. 

When  it  becomes  convenient  or  necessary 
for  a  member  to  withdraw  there  are  usually 
no  more  obstacles  in  the  way  than  are  opposed 
to  the  withdrawal  of  deposits  from  a  savings 
bank.  The  directors  may  reserve  the  right  to 
require  a  notice  of  an  intention  to  withdraw, 
but  the  practice  is  to  permit  payment  on  de- 
mand of  both  the  principal  and  the  accrued 
dividends  or  interest.  It  sometimes  happens 
that  a  request  for  money  comes  at  the  time 
when  the  treasury  is  empty,  but  in  such  case 
the  member  will  usually  be  accommodated  at 
the  next  meeting  out  of  the  receipts  for  the 
evening. 

There  has  been  a  good  deal  of  laxity  in  safe- 
guarding the  funds.  The  fact  that  the  treas- 
urer is  selected  by  his  neighbors  upon  the 
strength  of  their  knowledge  of  his  character 
and  of  his  means  affords  a  measure  of  pro- 


BUILDING   AND   LOAN   ASSOCIATIONS        145 

tection  against  incompetency  or  dishonesty, 
but  on  the  other  hand  the  neighborly  feeling 
is  likely  to  lead  to  a  degree  of  carelessness. 
While  the  constitution  will  require  that  the 
treasurer  give  a  bond,  the  requirement  may 
not  be  enforced,  or  the  quality  of  the  bonp 
may  not  be  closely  scrutinized.  If  the  bond 
were  regularly  secured  and  paid  for  by  the 
association,  this  difficulty  would  be  avoided. 
As  it  is,  the  members  are  not  infrequently  the 
victims  of  defaulting  treasurers.  This  point 
is  so  clearly  presented  by  Mr.  D  wight  Harri- 
son, State  Inspector  of  Building  and  Loan 
Associations  for  Ohio  in  his  report  for  1897 
that  this  portion  of  the  report  is  here  quoted : 

"  It  is  a  matter  of  grave  comment  that  in 
few  of  the  cases  where  shortages  and  defalca- 
tions were  discovered  were  bonds  found,  and 
in  no  case  when  found  were  they  sufficient  to 
cover  the  shortage.  Either  the  amount  of 
the  bond  was  too  small  or  it  was  found  im- 
possible to  realize  upon  it.  In  each  case  the 
bond  was  a  personal  one.  The  Bureau  is  op- 
posed to  personal  bonds  because  they  do  not 
meet  with  the  necessary  and  vital  require- 
ments.    The  aim  of  first  importance  in  the 


146  SAVINGS    INSTITUTIONS 

requirement  of  a  bond  is  that  in  the  event  of 
loss  there  shall  be  sure  indemnity,  promptly 
and  willingly  paid,  as  well  as  a  strict  account- 
ability of  the  person  responsible  to  the  guar- 
antor. These  requirements  surety  companies 
are  able  to  fill.  The  Bureau  therefore,  rec- 
ommends that  surety  bonds  be  required  of  all 
officers  of  building  associations  required  under 
the  law  to  give  bond,  believing  that  they  will 
lessen  the  number  of  shortages,  and  defalca- 
tions and  insure  to  the  associations  a  speedy 
recovery  and  restitution  of  the  amount  lost 
by  reason  of  any  that  might  occur. ' ' 

In  the  future  the  building  feature  is  likely 
to  be  of  continually  diminishing  importance, 
and  the  associations  to  become  more  and  more 
of  the  character  of  savings  institutions  man- 
aged in  the  interest  of  the  depositors.  The 
policy  almost  inevitably  inclines  to  that  side 
now,  and  the  loaning  feature  almost  inevitably 
becomes  a  mere  incident  to  the  savings  bank 
management.  A  savings  bank  must  also  be 
a  loan  association,  and  on  the  other  hand  a 
loan  association  finds  it  to  its  advantage  to 
adopt  a  savings  bank  feature ;  but  it  is  next  to 
impossible  to  construct  a  policy  which  is  equally 
favorable  to  those  who  deposit  money  and  to 


BUILDING   AND   LOAN   ASSOCIATIONS        147 

those  who  borrow.     The  two  interests  seem 
to  be  irreconcilably  antagonistic. 

The  policy  of  favoring  borrowers  may  be 
followed  when  that  purpose  is  clearly  expressed 
and  where  the  conditions  are  favorable.  But 
the  conditions  are  not  likely  to  be  favorable 
where  the  membership  is  distributed  over  a 
number  of  different  classes  and  employments, 
for  a  loaning  policy  which  is  alike  adjusted  to 
the  needs  of  a  number  of  different  classes  of 
borrowers,  is  very  difficult  to  construct.  Asso- 
ciations of  small  farmers,  as  in  the  case  of  the 
Raiffeissen  societies  in  Germany,  may  con- 
tinue to  make  their  policies  subservient  to  the 
interest  of  borrowers,  but  it  is  scarcely  feasible 
among  any  other  classes.  The  interests  of 
persons  of  small  means  desiring  to  own  their 
own  homes,  may  formerly  have  been  sufficient 
to  support  loan  societies,  but  this  motive  is 
not  as  strong  now  as  formerly,  home  owner- 
ship among  the  artisan  class  has  come  to  be 
considered  both  of  doubtful  economy  and  of 
doubtful  expediency,  and  thinking  people  are 


148  SAVINGS    INSTITUTIONS 

coming  to  the  conclusion  that  it  is  cheaper  to 
pay  rent  than  it  is  to  own  a  home.  Certainly 
the  tenant  has  not  to  suffer,  as  the  landlord 
must,  from  unexpected  shrinkages  in  value 
which  so  often  result  from  the  fickleness  of 
popular  favor  in  abandoning  one  section  of  a 
city  for  another.  Neither  is  he  harassed  by 
unexpected  burdens  imposed  by  assessments. 

Precariousness  of  employment  is  another 
objection  to  home  ownership — the  loss  of  posi- 
tion often  necessitating  removal  to  another 
town. 

But  granting  these,  and  other  objections 
which  might  be  mentioned,  to  home  owner- 
ship, it  must  continue  to  be  a  powerful  attrac- 
tion to  many  rent  payers,  and  it  must  prove  a 
great  incentive  to  thrift.  The  man  who  bor- 
rows to  build  has  behind  him  a  fine  stimulus- 
to  thrift. 


CHAPTER  V 

SAVINGS   BANKS 

If  an  investigation  as  to  the  best  institution 
for  the  cultivation  of  provident  habits  is  ap- 
pHed  to  individuals,  it  will  often  be  found  that 
some  form  of  insurance  is  the  best,  and  it  will 
not  infrequently  be  found  that  the  building 
association  is  the  best.  But  the  institution 
which  seems  to  afford  a  high  average  of  ad- 
vantages, whilst  avoiding  the  more  prominent 
faults  of  these,  is  the  savings  bank.  Perhaps 
its  greatest  advantage,  which  may  indeed  in 
many  cases  be  a  disadvantage,  consists  in  the 
larger  freedom  it  allows  to  its  patrons.  It 
encourages  saving  without  prescribing  in  any 
way  the  quantity  or  regularity  of  doses  of  sav- 
ing ;  and  it  leaves  the  depositor  free  to  invest 
his  savings  at  any  stage  of  its  accumulation. 

It  is  interesting  to  note  that  the  man  who 
possessed  perhaps  the  least  optimism  in  his 

(149) 


150  SAVINGS   INSTITUTIONS 

view  of  the  future  of  the  laboring  classes  of 
all  who  ever  studied  their  conditions  sees  a 
ray  of  light  in  the  savings  bank. 

"  Of  all  the  plans  which  have  yet  been  pro- 
posed for  the  assistance  of  the  laboring  classes," 
says  Malthus,  "the  savings-banks,  as  far  as 
they  go,  appear  to  me  much  the  best,  and  the 
most  likely,  if  they  should  become  general,  to 
effect  a  permanent  improvement  in  the  condi- 
tion of  the  lower  classes  of  society.  By  giv- 
ing to  each  individual  the  full  and  entire  bene- 
fit of  his  own  industry  and  prudence,  they  are 
calculated  greatly  to  strengthen  the  lessons  of 
Nature  and  Providence;  and  a  young  man 
who  had  been  saving  from  fourteen  or  fifteen 
with  a  view  to  marriage  at  four  or  five  and 
twenty,  or  perhaps  much  earlier,  would  prob- 
ably be  induced  to  wait  two  or  three  years 
longer  if  the  times  were  unfavorable ;  if  corn 
were  high ;  if  wages  were  low ;  or  if  the  sum 
he  had  saved  had  been  found  by  experience 
not  to  be  sufficient  to  furnish  a  tolerable  secur- 
ity against  want,  A  habit  of  saving  a  portion 
of  present  earnings  for  future  contingencies 
can  scarcely  be  supposed  to  exist  without 
general  habits  of  prudence  and  foresight ;  and 
if  the  opportunity  furnished  by  provident 
banks  to  individuals  of  reaping  the  full  bene- 
fit of  saving  should  render  the  practice  general 
it  might  rationally  be  expected  that,  under  the 
varying  resources  of  the  country,  the  popula- 
tion would  be  adjusted  to  the  actual  demand 
for  labor,  at  the  expense  of  less  pain  and  less 


SAVINGS   BANKS  151 

poverty ;  and  the  remedy  thus  appears,  so  far 
as  it  goes,  to  apply  to  the  very  root  of  the 
evil."i 

The  treatment  of  the  law  of  wages  by  David 
Kicardo  would  seem  also  to  indicate  the  proper 
direction  for  ameliorative  effort.  He  taught 
that  the  natural  tendency  of  wages  is  to  seek 
the  lowest  point  of  subsistence,  and  that  under 
the  free  play  of  this  tendency  society  would 
gravitate  to  the  most  brutal  state;  and  that 
the  way  to  avoid  it  is  to  raise  the  subsistence 
minimum  through  the  inspiration  of  a  higher 
standard  of  Uving;  to  multiply  human  wants 
and  intensify  them  to  the  point  of  the  neces- 
sary sacrifices  for  their  gratification. 

Mr.  J.S.  Mill^  suggests,  as  a  means  of  realiz- 
ing this,  a  system  of  compulsory  universal 
education,  accompanied  by  state  encourage- 
ment to  emigration.  By  encouraging  young 
married  couples  and  families  with  grown  chil- 
dren to  emigrate,  Mill  thought  the  tension  of 

^  Essay  on  Population,  Book  VI,  Ch.  XII. 

2  Principles  of  Political  Economy,  Book  II,  Ch.  13,  Sec.  3. 


152  SA.VINGS   INSTITUTIONS 

competition  for  employment  might  be  so  far 
relieved  as  to  afford  one  whole  generation  of 
comfort  to  the  laboring  population.  The 
higher  standard  of  living  thus  procured,  to- 
gether with  a  wide  diffusion  of  education, 
were  expected  to  operate  as  checks  upon 
population  in  succeeding  generations.  And  it 
is  often  urged  in  the  United  States  that  the 
restriction  of  immigration  would  tend  to  pre- 
vent the  growth  of  bad  economic  conditions. 
Either  of  these  schemes  would  fall  short  of  its 
purpose  unless  supplemented  by  specific  meas- 
ures for  developing  economic  habits.  A  capa- 
city for  enjoyment  does  not  necessarily  include 
an  ability  to  obtain  it ;  and  it  is  the  province 
of  a  directive  intelligence  to  discover  the 
habits  that  are  most  conducive  to  economic 
strength,  and  then  to  discover  the  means  to 
develop  them. 

Two  institutions  directly  minister  to  the 
growth  of  the  saving  habit,  one  incidentally, 
and  the  other  avowedly.  Ordinary  commer- 
ical  banks  incidentally  foster  the  saving  spirit 


SAVINGS   BANKS  153 

among  capitalists,  the  inducements  being  safe 
custody  of  deposits  and  entire  freedom  of 
withdrawal,  and  credit  with  the  bank.  And 
commercial  enterprise,  where  industry  is 
sufficiently  versitile,  is  quick  to  supply  the 
demand  for  banking  facilities. 

The  case  is  different  with  the  wage-earning 
classes.  They  do  not  have  occasion  to  borrow 
money  for  use  in  their  employment,  and  their 
relatively  low  earning  power  renders  saving 
with  them  a  more  difficult  matter.  And  they 
are  apt  to  lack  the  culture  which  renders  the 
things  that  are  more  difficult  to  attain  attrac- 
tive. Hence  the  need  for  an  extraordinary 
influence  if  the  savings  of  the  masses  are 
made  available  for  social  or  economic  uses. 
Instead  of  the  commercial  spirit  the  philan- 
thropic spirit  must  serve — in  one  form  or  an- 
other. 

There  are  two  reasons  why  this  has  been 
essentially  a  modern  philanthropy.  One  is 
because  of  the  free,  mobile,  and  precarious 
status  of  labor  in  modern   times.     And  the 


154  SAVINGS    INSTITUTIONS 

other  is  because  extensive  saving  is  suggested 
by  the  demands  of  capitahsm;  while  men 
still  worked  with  tools  and  in  small  shops 
there  was  no  extensive  market  for  savings. 
However  conditions  in  ancient  civilizations  did 
suggest  institutions  similar  to  modern  savings 
banks,  which  only  lacked  the  brace  of  modem 
conditions  to  insure  a  thrifty  growth.  It  was 
in  the  second  century  after  Christ  that  the 
humane  custom  obtained  in  Eome  of  permit- 
ting slaves  to  deposit  extra  earnings  to  create 
a  fund  for  the  final  purchase  of  their  freedom, 
and  legion  savings  banks  were  provided  under 
the  Roman  emperors  for  the  accommodation 
of  the  soldiers.  1 

According  to  de  Malerce  modern  savings 
banks  found  their  first  literary  advocacy  in 
France,  their  first  practical  test  in  Germany, 
and  their  first  statutory  regulation  in  Eng- 
land. 2     Hughs  Delestre,  the  reputed  author  of 

^  Veget,  De  re  iidlitare,  v.  2,  p.  20. 

2  Address  before  Academy  of  Moral  and  Political  Science, 
Paris,  1890. 


SAVINGS  BANKS  155 

the  idea,  in  a  four- volume  work  published  in 
1610  proposed  an  institution  for  the  benefit  of 
the  "  Wage  worker,  who  might  deposit  his 
savings  and  withdraw  them  again,  in  part  or 
in  whole  as  he  might  require,  with  interest 
according  to  the  time  they  had  been  on  de- 
posit." And  this  institution  was  designed  to 
take  the  place  of  alms  giving.  ^ 

It  remained  for  Germany  to  put  this  plan  to 
the  test  in  the  reorganization  of  a  philanthropic 
institution  {BesorgungsanstaU)  which  had  been 
estabhshedin  1765  by  a  number  of  benevolent 
citizens  of  Hamburg.  It  was  made  over  into  a 
savings  bank  in  1778,  and  it  was  announced 
that  it  was  for  the  special  benefit  "  of  the 
more  dependent  of  the  industrial  classes,  such 
as  servants,  day  laborers,  hand  workers,  sea- 
men, etc.,  for  the  collection  and  increase  of 
their  small  savings.  ^  The  movement  thus 
initiated   spread  rapidly  throughout  Europe. 

^  Described  in  Conrad's  Handworterbucli,  v.  V. ,  p.  786. 

^  Elster  in  "  Die  Sparkasse"  gives  the  honor  of  establishing 
the  first  savings  bank  to  England.  The  economist  Karl  Hein- 
rich  Rau  gives  it  to  Hamburg. 


156  SAVINGS    INSTITUTIONS 

The  opportuneness  of  such  an  institution 
seemed  to  appeal  strongly  to  the  philanthropic 
sense  of  Christendom. 

The  ministers  and  the  churches  were  promi- 
nent among  its  supporters,  especially  in  Eng- 
land. 1 

Princely  patronage  was  also  a  strong  factor, 
— particularly  in  Germany.  The  one  at  Olden- 
burg was  established  by  Duke  Peter  Frederick 
Gunther  in  1786  with  the  declared  object  "  that 
persons  of  lowly  position  and  small  means 
should  have  the  opportunity,  which  had  be- 
fore been  wanting,  to  place  the  small  savings 
which  they  were  able  to  lay  by  over  their 
necessary  expenses,  where  they  may  draw  in- 
terest without  danger  of  loss. ' '  The  Wlirtem- 
berg  Savings  Bank  at  Stuttgart  was  founded  in 
1819  by  Queen  Catherine.  The  Savings  Bank 
of  the  Grand   Duchy  of   Weimar  was    estab- 

'  The  eiiitor  of  the  Cologne  Volkszeitung  states  iu  the  issue 
of  Jan.  20,  1894,  that  the  Abbot  of  St.  Blasien,  a  Catholic 
prelate,  established  a  savings  bank  in  the  Black  Forest  as 
early  as  the  beginning  of  the  eighteenth  century,  but  I  have 
not  been  able  to  verify  the  statement. 


SAVINGS  BANKS  157 

lished  by  the  Duchess- Princess  Maria  Paulom- 
na  in  1821,  and  the  princess  not  only  under- 
took the  protectorate  but  shared  in  its  man- 
agement. The  State  Central  Savings  Bank 
of  the  Duchy  of  Meiningen  was  founded  by  the 
reigning  duke.  And  Frederick  Wilham  the 
Third  was  the  author  of  the  statute  of  1838 
after  which  the  Prussian  savings  banks  have 
generally  been  constructed.  ^ 

The  idea  seems  to  have  been  first  presented 
to  the  English  people  through  the  publications 
of  Jeremy  Bentham;  and  to  have  been  put 
into  practice  through  the  endeavors  of  the 
English  parsons.  ^  Two  years  after  the  publi- 
cation of  Bentham 's  scheme  for  "  Frugality 
Banks  "  the  Eev.  Joseph  Smith  had  one  in 
operation  in  his  parish  at  Wendover.  In  1810 
Parson  Duncan  established  one  at  Ruthwell, 
and  about  that  time  other  parochial  savings 
banks  were  established  and  an  organization 
was  affected  endeavoring  to  bring  them  into 

^  Dns  Spa?-kmsenw€sen,  by  G.  Drape,  p.  10. 

^  The  Frugality  Bank  scheme  was  published  in  1797. 


158  SAVINGS    INSTITUTIONS 

closer  relationship  one  with  another.  A  sav- 
ings bank  feature  was  added  to  Priscilla  Wake- 
field's Tottingham  Friendly  Society  as  early 
as  1798.1 

The  subsequent  development  in  England  has 
been  mainly  apart  from  religious  patronage. 
Prior  to  the  use  of  the  post  office  for  the  en- 
couragement of  savings,  the  banks  were  as  a 
rule  philanthropically  founded  institutions, 
and  they  have  generally  l)een  known  as 
"  Trustee  Savings  Banks  ".  They  had  grown 
sufficiently  in  importance  by  1817  for  acts  of 
parUament  to  be  passed  for  their  control.  The 
new  movement  awakened  great  enthusiasm  in 
philanthropic  circles  and  excited  the  most  ex- 
travagant hopes  for  favorable  results.  Henry 
Duncan  declared  his  belief  that  the  bank 
founded  l)y  him  at  Ruth  well,  Scotland,  would 
render  the  parish  pauper  tax  unnecessary. 

In  France  a  practical  programme  for  pro- 

'  The  Enc.  Brit,  saj's  the  savings  bank  was  one  of  the 
"many  exceUent  projects  of  Daniel  Defoe  in  1697,"  but  a 
careful  search  has  failed  to  find  authority  for  this  statement. 


SAVINGS   BANKS  169 

moting  savings  grew  out  of  a  society,  organ- 
ized in  1770  to  consider  the  problems  of  the 
poorer  classes,  and  to  discover  means  whereby 
they  might  be  provided  against  the  future. 
Six  years  later  the  chemist,  Lavoisier,  pre- 
sented to  the  Provincial  Assembly  of  Orleans 
a  proposal  for  a  Provincial  Annuity  Institution 
to  be  known  as  the  '•'' caisse  c?'  epargne  du 
peuple^\  but  it  was  not  accepted.  Condorcet, 
in  his  essay  on  the  ' '  Human  Mind  ' '  proposed 
the  addition  of  a  savings  bank  feature  to  the 
banks  already  established. 

That  the  movement  in  the  direction  of 
establishing  savings  banks  which  gained  such 
impetus  in  the  latter  part  of  the  last  century, 
and  in  the  beginning  of  the  present  was  not 
the  product  of  local  conditions  or  of  local 
agitations  solely  is  shown  by  the  following 
partial  record :  The  aristocratic  government  of 
Berne  established  a  savings  bank  in  1787  and 
endowed  it  with  75,000  livres.  In  1789  a  pri- 
vate savings  institution  was  established  at 
Geneva,  which  lived  but  a  short  time.     Kiel, 


160  SAVINGS    INSTITUTIONS 

in  Germany,  followed  in  1796,  London  in  1798, 
Altona  in  1799,  Gottingen  in  1801,  Zurich  in 
1805,  and  Lauf,  in  Switzerland,  in  the  same 
year.  Lady  Douglass  estabhshed  the  Servant's 
Savings  bank  at  Bath  in  1808.  In  1809  the 
Basel  Loan  Institute  was  enlarged  to  include 
savings  accounts,  and  it  was  guaranteed  to 
the  amount  of  64,000  livres.  ^ 

From  Continental  Europe  and  from  England 
savings  banks  have  followed  the  streams  of 
emigration,  the  different  types  developing  in 
the  colonies  somewhat  according  to  racial 
descent,  and  still  more  according  to  the  degree 
of  attachment  to  the  fatherland.  The  Anglo- 
Saxons  have  done  the  most  to  extend  the 
sphere  of  postal- savings  institutions. 

The  name  "  savings  bank  "  is  so  indiscrim- 
inately used  as  to  warrant  a  precise  definition. 
This  is  desirable  also  because  institutions  that 
are  primarily  commercial  develop  "  savings 
departments  ",  which  pay  interest  on  deposits 

'  Gernardo,  Bicufauance  Politique,  v.  3,  p.  170. 


SAVINGS   BANKS  161 

and  are  otherwise  equipped  to  attract  a  lower 
class  patronage;  and  also  because  on  the 
other  hand  some  institutions  which  were 
originally  designed  to  do  savings  bank  work 
drift  into  another  class  of  business.  The 
right  of  an  institution  to  be  styled  a  ' '  sav- 
ings bank ' '  should  be  determined  by  the  pres- 
ent motives  behind  the  management.  If  an 
institution  is  governed  by  a  spirit  of  cultivat- 
ing savings,  and  if  it  is  managed  entirely  in 
the  interest  of  the  depositors,  it  deserves  to  be 
designated  as  a  "savings  bank",  but  in  no 
other  case.  The  following  definition  expresses 
the  author's  idea  of  the  proper  meaning  of  the 
term: 

Savings  hanks  are  institutions  established 
by  public  authority,  or  by  private  persons,  in 
order  to  encourage  habits  of  saving  by  afford- 
ing special  security  to  owners  of  deposits,  and 
by  the  payment  of  interest  to  the  full  extent  of 
the  net  earnings,  less  whatever  reserve  the 
management  may  deem  expedient  for  a  safety 
fund  ;  and  in  furtherance  of  this  purpose  bank 


162  SAVINGS    INSTITUTIONS 

offices  are  located  at  places  where  they  are 
calculated  to  encourage  savings  among  those 
persons  who  most  need   such   encouragement. 

The  savings  bank  is  distinguished  from  the 
ordinary  commercial  bank  in  various  ways. 
It  is  properly  and  commonly  a  philanthropic 
institution,  and  its  poHcy  is  influenced  by  edu- 
cational considerations.  Its  object  being  to 
promote  provident  habits  and  to  increase  the 
resources  of  the  laboring  classes,  its  first  con- 
cern is  for  the  safety  of  deposits,  the  earnings 
being  an  important  but  subordinate  matter. 
Being  so  constituted  that  the  directory  and 
managing  officials  have  no  special  financial 
interest  in  the  returns,  the  methods  are  ex- 
tremely conservative. 

The  commecial  bank,  on  the  other  hand,  is 
primarily  a  money-making  institution,  man- 
aged in  the  interest  of  its  stockholders,  and  the 
managing  officials  are  often  heavily  interested 
in  it.  It  is  expedient  for  the  directors  to  es- 
tablish a  reputation  for  safe  methods  but  there 
is  a  constant  temptation  to  sacrifice  considera- 


SAVINGS   BANKS  163 

tions  of  safety  in  the  interest  of  larger  net  re- 
turns to  stockholders. 

As  a  rule  savings  banks  do  not  discount 
paper  and  thus  they  are  removed  from  tempta- 
tions to  speculation  to  which  commercial 
banks  are  exposed.  Instead  they  invest  their 
deposits  in  public  securities,  or  in  loans  secured 
by  real  estate  mortgages. 

Another  distinguishing  characteristic  is  the 
greater  attractiveness  of  savings  banks  to 
small  depositors,  which  finds  its  most  attract- 
ive form  in  the  interest  rate.  Commercial 
banks  as  a  rule  do  not  pay  interest  on  deposits, 
and  the  exceptions  are  usually  made  in  the  in- 
terest of  large  time  deposits. 

The  choice  of  location  constitutes  still  an- 
other distinguishing  characteristic.  The  com- 
mercial bank  seeks  the  large  retail  and  whole- 
sale centers,  and  it  is  owing  to  this  policy  that 
entire  counties  in  some  of  the  southern  state 
have  no  banking  facilities  of  any  kind.  The 
savings  bank,  on  the  other  hand,  if  intelli- 
gently managed,  will  seek  first  the  class  or 


164  SAVINGS    INSTITUTIONS 

community  most  in  need  of  cultivating  the 
saving  habit. 

The  distinction  between  the  savings  bank 
and  such  schemes  as  the  Farmers'  AUiance 
Sub-Treasury  project  should  be  quite  apparent. 
This  contemplated  government  agencies  to  be 
located  in  different  parts  of  the  country  to 
receive  deposits  and  lend  money  on  imperish- 
able securities,  the  interest  not  to  exceed  two 
per  cent.  Thus  it  was  evidently  conceived  in 
the  interest  of  borrowers,  and  not  of  deposi- 
tors. It  was  a  debtor-class  project,  and  favored 
borrowing  rather  than  lending.  The  value  of 
the  sharp  distinctions  here  made  between  the 
essence  of  a  savings  institution  proper  and  of 
other  banking  institutions  may  be  appreciated 
in  the  light  of  temptations  to  divert  the  sav- 
ings bank  from  its  original  purpose,  for  its 
proper  end  is  not  to  afford  relief  to  the  debtor 
class  nor  to  curb  the  exactions  of  the  com- 
mercial banks.  In  recent  years  the  Victorian 
ministry,  in  Austraha,  in  considering  the  high 
rate  of  interest  charged  by  banks,  which  was 


SAVINGS   BANKS  165 

considered  prejudicial  to  the  interests  of  busi- 
ness, thought  of  finding  rehef  through  the 
savings  banks.  It  was  suggested  that  loans 
might  be  made  through  these  banks  at  five 
per  cent  or  less.  ^  The  savings  banks,  as  they 
pass  into  the  hands  of  the  state,  will  continue 
in  peril  of  such  subversions  of  the  purpose  of 
their  establishment,  until  the  pubUc  has  come 
to  think  clearly  upon  their  essential  character 
and  the  limitations  of  their  functions. 

From  this  point  of  view  of  the  manage- 
ment savings  banks  admit  of  several  classifi- 
cations. 

First,  they  may  be  divided  into  philanthropic 
and  democratic  institutions.  The  first  assumes 
a  management  distinct  from  the  beneficiaries. 
It  may  be  on  the  part  of  cultivated  or  wealthy 
people ;  or  it  may  be  on  the  part  of  the  state  or 
of  the  local  government.  The  democratic 
savings  bank  is  under  a  co-operative  form  of 
government.     That  is,  the  depositors  are  the 

1  Bureau  of  Australia,  March  23,  1894. 


166  SAVINGS    INSTITUTIONS 

share  holders  and  the  directors  are  elected  by 
them. 

A  second  classification  may  be  made  into 
public  and  private  institutions.  The  title 
' '  Public  institutions  ' '  implies  a  government 
by  the  public  authorities  and  the  principle  is 
illustrated  in  state  and  city  savings  banks. 
"  Private  institutions  "  imply  a  voluntary 
organization  on  the  part  of  private  citizens, 
either  as  trustees  or  as  co-operators. 

Another  classification  which  might  be  made 
is  into  local  and  general  systems.  Local  sys- 
tems are  those  which  concern  themselves  with 
a  narrower  territory,  as  the  town  or  the 
county,  or  even  the  neighborhood,  and  they 
are  represented  by  the  trustee  banks,  the  co- 
operative banks  and  by  the  municipal  banks. 
The  general  system  seeks  to  cover  a  wide  ter- 
ritory, as  a  province  or  a  state,  and  it  is  repre- 
sented by  the  state  banks. 

But  these  classifications  only  suggest  the 
peculiar  species  of  usefulness  of  the  four  con- 
ventional types  of   savings  banks,  viz:    the 


SAVINGS   BANKS  167 

trustee,  the  co-operative,  the  municipal,  and 
the  national. 

In  making  a  study  of  different  classes  of 
savings  institutions  certain  criteria  should  be 
kept  in  mind,  and  the  judgment  should  not 
rest  upon  a  single  criterion,  but  investigation 
should  continue  down  the  list  until  there  is  a 
basis  for  a  final  balance  of  advantages.  Of 
all  the  different  criteria  which  might  be  se- 
lected for  purposes  of  comparison,  the  three 
most  important  are :  the  maximum  of  inten- 
sive results,  the  maximum  of  extensive  results, 
and  the  maximum  of  success  in  reaching  the 
most  desirable  classes  of  persons. 

From  the  point  of  view  of  intensive  results, 
the  study  inquires  into  the  character  of  the 
administration.  The  first  question  may  be  as 
to  whether  it  is  animated  by  the  pure  savings 
bank  spirit,  i.  e.,  whether  the  officials  are 
conscious  of  a  mission  to  perform  or  whether 
they  perform  their  offices  perfunctorily  and 
mechanically.  The  trustee  system  seems  bet- 
ter adapted  to  secure  intensive  results,  in  so 


168  SAVINGS    INSTITUTIONS 

far  as  the  trustees  are  in  the  work  for  the  love 
of  it,  and  since  they  have  been  induced  to 
give  their  time  and  labor  to  it  by  no  pecuniary 
reward,  but  by  its  innate  attractiveness.  On 
the  other  hand,  less  vigilance  and  alertness 
may  be  expected  on  the  part  of  an  agent  of 
the  government  in  so  far  as  he  regards  himself 
as  simply  a  part  of  the  political  mechanism. 
But  the  material  obstacles  against  which 
private  philanthropy  has  to  contend  need  to 
be  considered.  The  funds  for  elaborate  equip- 
ment are  often  wanting.  It  sometimes  hap- 
pens that  even  the  clerical  services  must  de- 
volve upon  persons  who  volunteer  to  give  their 
time  and  labor  gratis.  A  public  administra- 
tion, on  the  other  hand,  may  have  the  backing 
of  the  common  treasury,  and  it  at  least 
brings  to  bear  the  confidence  which  attaches 
to  the  solvency  of  the  city  or  state.  Such  an 
administration  can  be  surer  of  its  ground  in 
pushing  forward  a  programme  of  extension. 
Public  effort  is  also  likely  to  be  more  constant, 
even  if  it  tends  to  become  more  automatic,  for 


SAVINGS  BANKS  169 

the  reason  that  its  support  is  permanently 
provided  for.  Private  effort,  on  the  contrary, 
is  subject  to  ebbs  and  flows  of  energy  accord- 
ing to  revivals  and  subsidences  of  general  in- 
terest in  the  subject.  ^ 

The  next  inquiry  is  into  the  question 
whether  the  agencies  are  wholly  or  only  par- 
tially savings  banks.  If  the  agents  give  their 
undivided  time  to  a  savings  bank  business, 
their  work  is  apt  to  be  more  fruitful  than  if 
it  is  partly  given  to  some  other  occupation. 
If  a  man  is  a  ticket  seller  at  a  railway  office, 
and  only  incidentally  receives  savings  deposits, 
a  lower  grade  of  efficiency  may  be  expected. 
The  depositors  are  Hkely  to  be  neglected  if 
not  chilled  by  the  absent  manner  of  the  agent. 

1  This  principle  is  thus  well  expressed  by  Prof.  Henry  C. 
Adams:  "The  motives  which  impel  men  to  render  gratuitous 
service  are  not  constant  and  persistent,  and  consequently,  re- 
liance cannot  be  placed  upon  them  for  the  most  efficient  pub- 
lic service.  Patriotism,  under  the  impulse  of  strong  excite- 
ment, is  capable  of  effecting  prodigious  results,  but  it  is  apt 
to  die  away  with  the  occasion  which  brought  it  forth.  While, 
therefore,  it  may  be  wise  in  times  of  emergency  to  appeal  to 
this  motive  for  securing  service,  it  cannot  be  accepted  as  a 
basis  for  rendering  continued  service."    Finance,  pp.  16  and  17. 


170  SAVINGS    INSTITUTIONS 

The  postmaster  is  also  less  qualified  in  this  re- 
spect. His  primary  function  must  be  that  of 
attending  to  the  mails,  and  his  mind  is,  on  this 
account,  sure  to  be  applied  less  keenly  to  the 
needs  of  the  savings  department.  Even  if  a 
savings  bank  could  be  joined  to  another  office 
which  would  not  have  a  superior  claim  upon 
the  attention  of  the  agent  the  divided  service 
would  be  less  efficient.  Where  the  conditions 
will  admit  of  an  undivided  attention  and  an 
undivided  service  everything  else  equal  it  will 
yield  more  intensive  results.  In  this  regard  a 
municipal  or  a  private  system  would  seem  to 
enjoy  an  advantage  over  a  national  system 
where  it  takes  the  form  of  a  post-office  sav- 
ings bank. 

When  the  question  is  studied  from  the 
standpoint  of  extensive  results  the  balance  of 
the  theoretical  advantages  seems  to  be  on  the 
side  of  pubhc  as  opposed  to  private  institu- 
tions, and  of  public  institutions  on  a  national 
rather  than  a  local  scale.  [^^The  question  here 
is  how  many  localities  enjoy  savings  facilities, 


SAVINGS  BANKS  171 

not  how  many  people  are  converted  to  the 
sa\ings  habit.  The  test  of  intensive  results 
would  be  the  percentage  of  the  population 
within  a  given  territory  that  are  counted  as 
savings  bank  customers.  The  test  here  is  how 
wide  a  scope  of  opportunity  is  afforded.  Pri- 
vate philanthropy  is  apt  to  be  lacking  in  sys- 
tem and  it  is  pretty  sure  to  work  in  spots.  It 
is  even  unlikely  to  operate  over  any  consider- 
able territory,  for  while  religion  is  propagated 
along  broad  hues  through  private  agencies, 
even  extra-national  in  the  case  of  foreign  mis- 
sions, private  philanthropy  has  never  developed 
the  power  of  organization  capable  of  operat- 
ing a  network  of  sub-agencies  over  a  wide  ter- 
ritory. Hence  the  city  may  be  more  effectu- 
ally covered  by  a  municipal  than  by  a  private 
system. 

The  superiority  of  a  national  system  over  a 
local  one  in  this  regard  is  evident,  for  the  ex- 
tension of  the  latter  depends  upon  the  energy 
and  enterprise  of  the  different  locahties, 
which   is    never    uniform.     The    growth    in 


172  SAVINGS    INSTITUTIONS 

the  case  of  a  municipal  system  will  fol- 
low the  line  of  municipal  strength,  and  the 
weaker  communities,  which  are  usually  the 
most  needy,  are  not  likely  to  be  reached  by 
this  type.  On  the  other  hand,  a  state  system 
is  likely  to  make  the  weaker  communities  the 
object  of  the  greatest  concern,  and  if  there  is 
any  neglect  it  will  be  of  the  strong  communi- 
ties, which  are  better  able  to  depend  upon 
their  own  resources.  The  state  is  equipped 
with  the  facilities  for  executing  a  large  scale 
scheme,  since  it  has,  in  the  post-office,  a  ready- 
made  mechanism  which  only  requires  slight 
modification  to  enable  it  to  bring  savings 
facilities  to  every  community  which  affords  a 
mail  service,  and  if  it  controls  a  railway  sys- 
tem or  an  express  service  it  may  also  join  a 
savings  bank  to  the  agencies  of  these. 

The  location  of  the  savings  banks  in  the 
country  is  a  most  important  consideration,  and 
here  the  success  must  largely  depend  upon  the 
breadth  of  view.  A  centralized  national  sys- 
tem has  a  great  advantage  over  a  local  one. 


SAVINGS  BANKS  173 

The  test  is  not,  how  large  a  percentage  of  the 
population  become  patrons  of  the  bank  but 
how  extensively  the  most  improvident  classes 
have  been  reached.  Improvidence  becomes  to 
an  extent  localized  in  a  section  of  the  country, 
or  in  a  community  within  the  city.  And  a 
backward  section  is  almost  inevitably  an  im- 
provident section,  for  the  backwardness  is  due 
in  large  measure  to  a  low  saving  power. 
Capitalistic  undertakings  are  secure  because 
the  ratio  between  earning  power  and  living 
expenditures  tends  to  an  equality,  and  the  re- 
demption of  the  section  demands  that  the  lack 
of  individual  providence  be  made  good  by  col- 
lective savings.  Thus  a  local  system,  like  the 
German,  will  leave  the  backward  sections  of 
the  country  unprovided  for.  Or  a  voluntary 
system  like  the  present  one  in  America,  may 
find  a  high  development  only  in  three  or  four 
states,  and  in  those  states  only  in  a  few  large 
cities.  The  post-office  seems  an  ideal  institu- 
tion for  extending  saving  facilities ;  it  reaches 
every  rural  community,  and  the  more  rural  or 


174  SAVINGS  INSTITUTIONS 

backward  the  community,  perhaps,  the  more 
intimately  does  it  touch  the  Hfe  of  its  every 
individual. 

The  same  localizing  tendency  is  found  with- 
in the  locality.  Any  city  could  be  plotted  with 
reference  to  the  general  degree  of  improvi- 
dence among  the  citizens.  A  scientific  sav- 
ings system  within  a  city  will  extend  its  facili- 
ties not  so  much  with  reference  to  the  amount 
of  business,  as  with  reference  to  the  amount 
of  need  of  encouragement  to  save.  In  the 
better  class  of  communities,  the  people  wiU 
seek  the  savings  bank,  in  the  poorer  the 
savings  bank  must  seek  the  people.  Here 
the  advantage  of  a  centralized,  philanthropic 
system  is  evident.  As  between  the  state 
government  and  the  city  government  it  is  rea- 
sonable to  assume,  and  experience  amply 
proves,  that  the  city  is  more  competent  to 
minister  to  the  needs  of  the  different  locali- 
ties. The  municipal  savings  banks  in  both 
Germany  and  France  (the  latter  in  competition 
with  the  Postal  Savings  Bank)  have  exceeded 


SAVINGS  BANKS  175 

the  best  records  of  state  systems  in  cultivating 
savings. 

The  co-operative  bank,  owing  to  the  plan  of 
periodical  payments,  pecuhar  to  it,  is  not 
adapted  to  the  beginner,  but  it  is  well  calcu- 
lated to  keep  the  well  initiated  moving  in  the 
right  way.  The  wage  earner  should  deposit 
as  regularly  as  he  draws  his  pay,  and  this  the 
co-operative  bank  sees  that  he  does.  It  is  not 
altogether  clear  that  the  co-operative  bank 
should  enjoy  a  monopoly  of  this  principle, 
though  it  must  be  conceded  that  its  adoption 
by  a  pubUc  or  a  trustee  savings  bank  would 
considerably  complicate  its  management,  for 
it  should  not  be  to  the  exclusion  of  the  present 
plan.  But  a  postal  savings  bank  or  a  large 
municipal  bank,  or  even  a  large  trustee  bank 
might  add  this  feature,  and  allow  the  patrons 
to  elect  whether  they  will  resort  to  it  or  to  the 
more  accommodating  method. 

Both  the  municipal  bank  and  the  postal  bank 
have  the  advantage  over  the  trustee  system  in 
the   matter  of    a  more   general    confidence. 


176  SAVINGS    INSTITUTIONS 

They  each  enjoy  the  reputation  for  solvency 
possessed  by  the  government  behind  them. 
They  also  have  the  advantage  of  being  secure 
in  the  possession  of  the  educative  spirit.  As 
public  institutions  they  are  not  so  Uable  to 
degenerate  into  mere  investment  societies  for 
the  benefit  of  the  well-to-do. 

The  question  of  the  most  desirable  class  of 
patrons  may  be  an  open  one.  At  first  thought, 
the  line  of  distinction  seems  to  be  drawn  at  the 
laboring  class;  persons  who  work  for  wages 
being  considered  the  objects  of  special  con- 
sideration. But  this  is  a  very  rough  group- 
ing. Within  the  class  who  receive  wages, 
certain  sub-divisions  may  be  made,  as  into 
skilled  and  unskilled  workmen,  the  unskilled 
having  a  prior  claim  to  consideration  because 
they  occupy  a  more  precarious  economic 
situation. 

A  clearer  and  more  satisfactory  classification 
is  according  to  sex.  It  is  better  that  the  wife 
should  be  the  depositor  than  the  husband,  for 
she  is  naturally  the  element  of  thrift  in  the 


SAVINGS   BANKS  17T 

household.  Great  importance  attaches  to  the 
education  of  women  in  saving  because  the 
woman  in  the  home  is  either  a  fruitful  cause 
of  waste  or  she  is  the  chief  hope  of  better  Uv- 
ing.  Social  scientists  generally  recognize  her 
as  the  necessary  medium  to  a  higher  plane  of 
living.  It  is  sought  through  her  to  divert  con- 
sumption from  unwholesome  lines  by  improve- 
ment in  culinary  skill  and  by  the  influence  of 
greater  art  and  finer  taste  in  the  appointments 
and  care  of  the  home.  The  woman  is,  in  al- 
most every  sense,  of  greater  importance  than 
the  married  man,  of  the  artisan  class,  in  any 
scheme  for  storing  up  economic  energy.  The 
artisan  of  good  habits  who  has  ambitions  for 
economic  improvement  often  makes  his  wife 
his  banker,  and  gives  her  control  of  the 
domestic  budget.  She  must  at  least  have  the 
direction  of  the  details  of  the  expenditure  for 
food.  It  is  her  mind  also  which  conceives  of 
the  need  of  expenditure  for  repairs,  and  for 
new  articles  of  furniture  in  the  home.  For 
the  most  part,  the  man  only  exercises  a  veto 


178  SAVINGS    INSTITUTIONS 

power.  He  may  formulate  a  certain  general 
scale  of  expenditure  requiring  the  wife  to  keep 
within  the  estimates  for  the  respective  classes, 
and  beyond  this  he  may  call  in  question  or 
condemn  disproportionate  expenditures  within 
the  classes.  Where  the  income  is  small,  and 
where  nothing  is  laid  out  for  capital,  it  is  easy 
for  the  wife  to  pass  into  entire  control  of  the 
finances  of  the  household,  the  husband  reserv- 
ing only  a  small  amount  for  pocket  money. 
The  natural  division  of  powers  between  the 
husband  and  the  wife  is  for  the  former  to  per- 
fect his  skill  as  a  producer  and  to  concern  him- 
self in  all  ways  of  increasing  his  earning  pow- 
er, and  for  the  latter  to  learn  to  use  the  in- 
come wisely.  ^ 

Another  general  classification,  which  is  quite 
clear,  is  into  the  youthful  and  mature  classes. 


^  Xenophon,  in  his  Science  of  Good  Husbandry  or  Econom- 
ics, after  describing  the  natural  division  of  labor  between  the 
huslmnd  and  wife,  in  commentiiiij  on  the  power  of  the  wife 
to  help  or  hinder  the  husband,  says:  "  The  task  of  a  man 
who  has  an  unworthy  wife,  to  keep  his  homo  provided,  is  like 
attempting  to  pour  water  into  sieves  until  they  are  full." 


SAVINGS  BANKS  179 

A  large  list  of  children  among  the  depositors 
is  a  sure  sign  of  success,  for  the  unformed 
characters  are  the  most  hopeful  for  all  meUora- 
tive  effort,  and  in  none  more  than  in  education 
in  saving. 

The  problem  of  classification  is  less  com- 
plicated here,  owing  to  the  fact  that  children 
constitute  a  desirable  class  regardless  of  the 
economic  situation  of  their  parents.  It  is 
more  desirable  to  secure  the  children  of  poor 
parents  than  of  rich,  but,  in  view  of  chang- 
ing fortunes  and  of  the  temptations  to  de- 
structive improvidence  on  the  part  of  the  rich, 
it  is  evident  that  all  children  should  be  included 
as  proper  objects  of  savings  bank  care.  Provi- 
dence is  a  quality  which  may  not  be  inherited, 
and  it  is  less  likely  to  be  in  the  case  of  children 
of  men  who  have  themselves  acquired  fortunes 
than  of  those  who  come  of  a  long  line  of  opu- 
lence. The  man  who  has  acquired  a  fortune  is 
likely  to  be  so  exclusively  absorbed  in  wealth- 
getting  as  not  to  appreciate  the  value  of  cul- 
ture ;  and  the  children  of  such  men  are  likely  to 


180  SAVINGS    INSTITUTIONS 

invest  the  wealth  which  they  inherit  in  display. 
Where  the  ideals  do  not  extend  beyond  the 
mere  glory  of  riches,  the  wealth  will  be  in- 
vested largely  in  forms  that  wiD  advertise  the 
opulence  of  the  possessor,  in  fine  houses, 
horses,  equipages,  jewels,  etc. ,  or  in  the  phrase 
of  Dr.  Veblin,  laid  out  in  forms  of  ' '  conspicu- 
ous waste  ".  ^  The  pride  of  having  wealth  is 
more  likely  to  be  transmitted  than  the  pride 
of  acquiring  it,  and  consequently  the  balance 
of  probabilities  is  on  the  side  of  its  speedy 
dissipation. 

It  is  unfortunate  that  these  tests  cannot  be 
satisfactorily  appUed  in  many  instances  be- 
cause of  the  inadequacy  of  the  reports.  It 
often  happens  that  no  account  is  taken  of 
either  the  age,  the  sex,  or  the  occupation  of 
the  depositor.  In  other  cases,  such  combina- 
tions as  ' '  laboring  class  and  children  ' '  and, 
"  women  and  children  "  appear. 

^  Theory  of  the  Leisure  Class. 


CHAPTER  VI 

TRUSTEE  SAVINGS  BANKS 

The  trustee  savings  bank  is  the  original 
type.  It  stands  for  an  attempt  on  the  part  of 
members  of  the  weU-to-do  to  improve  the 
condition  of  the  poorer  classes,  and  involves 
a  self-sacrificing  service  on  the  part  of  a  few 
in  the  interest  of  the  masses. 

The  managing  board  of  trustees  is  a  body 
of  men  who  presumably  have  no  other 
motive  in  giving  their  service  than  their  devo- 
tion to  the  cause;  at  least  they  receive  no 
pecuniary  reward.  ^  The  self-sacrificing  spirit 
of  the  administration  greatly  increases  the 
chances  of  aggressive  work,  and  reduces  the 
chances  of  dishonesty  or  of  betrayal  of  trust. 
It  is  likewise  well  calculated  to  draw  a  gener- 
ous fund  of  enthusiasm  from  the  philanthropic 
sentiment  of   the  community,  and  to  enMst 

^  Sometimes  the  gratuitous  service  extends  to  the  clerical 
work  involved,  but  this  is  only  in  the  smaller  institutions. 
(181) 


182  SA.VINGS   INSTITUTIONS 

the  active  support  of  persons  who  have  leisure^ 
and  it  thus  affords  great  economies  in  the 
initial  stage,  the  cost  of  administration  being 
hardly  a  necessary  factor.  And  the  missionary 
spirit  is  hkely  to  add  a  bit  of  persuasion  and 
solicitation  to  opportunity. 

This  v^as  the  characteristic  type  in  England 
prior  to  the  introduction  of  the  principle  of 
postal  savings.  They  were  first  organized 
under  a  religious  impulse,  and  were  designed 
both  to  save  people  from  degradation  and  to 
save  the  parish  from  the  burden  of  the  poor 
rates.  Hence,  the  agitation  for  their  adoption 
was  extended  from  parish  to  parish,  and  the 
parson  was  frequently  the  central  figure  in 
the  organization.  But  in  spite  of  these  ad- 
vantages, they  failed  to  render  a  service  ade- 
quate to  the  needs,  until  finally  the  postal  sav- 
ings bank  was  introduced  as  a  remedy. 

The  American  savings  banks  have  been  in- 
variably of  the  trustee  type. »     But  not  because 

1  In  this  general  statement  the  joint  stock  institutions  called 
savings  banks,  are  not  included.     They  are  included,  how- 


TRUSTEE  SAVINGS  BANKS        183 

our  local  conditions  are  particularly  favorable 
to  this  or  any  type.  The  trustee  principle 
thrives  best  upon  a  spirit  of  personal  public 
service  on  the  part  of  the  better  conditioned 
classes,  and  these  classes  have  not,  until  quite 
recently,  been  distinguished  in  that  way  in 
America ;  they  have  generally  been  more  will- 
ing to  give  of  their  money  than  of  themselves. 
Indeed  this  kind  of  personal  service  is  peculiar 
to  an  aristocratic  rather  than  a  democratic 
social  order,  since  members  of  a  recognized 
social  elite  are  apt  to  be  trained  to  the  idea  of 
public  service ;  and  if  a  disinterested  devotion 
to  it  is  not  innate  in  the  individual,  the  fact 
that  such  service  is  a  badge  of  respectability 
may  suffice  to  induce  activity  of  this  charac- 
ter. Besides  these  considerations,  an  unwrit- 
ten doctrine  has  developed  in  historic  lands, 


ever,  in  the  estimates  of  the  savings  in  subsequent  parts  of 
this  chapter,  because  they  practically  represent  all  there  is  in 
the  way  of  savings  institutions,  excepting  building  and  loan 
associations,  in  the  greater  part  of  the  country.  Only  eleven, 
mutual  savings  banks  are  reported  West  of  Pennsylvania, 
and  these  report  an  aggregate  of  deposit  accounts  of  only 
135,997. 


184  SAVINGS    INSTITUTIONS 

that  the  claim  of  the  leisure  class  to  consider- 
ation must  depend  upon  the  measure  of  social 
service  rendered.  America  has  not  received 
the  benefit  of  ideals  of  social  service,  because 
our  political  and  social  doctrines  have  been 
opposed  to  the  aristocratic  scheme.  Indeed 
there  has  been  no  sympathy  for  such  a  motive 
on  the  part  of  the  masses  of  the  people.  A 
democratic  people  like  to  feel  that  they  are 
paying  for  what  they  receive  and  to  regard 
both  public  and  private  service  as  paid  service. 
A  number  of  reasons  have  conspired  to  ren- 
der the  establishment  of  savings  banks  of 
any  class  in  America  a  difficult  matter.  Op- 
position to  state  activity  on  individualistic 
grounds  has  stood  opposed  to  a  system  of 
national  savings  banks;  a  universal  lack  of 
confidence  in  the  strength  and  integrity  of  our 
municipal  governments  would  have  opposed  a 
municipal  system;  and  a  weak  form  of  the 
spirit  of  social  service  has  certainly  hindered 
the  development  of  trustee  savings  banks. 
Co-operative  savings  might  have  proven  more 


TRUSTEE  SAVINGS  BANKS        185 

in  harmony  with  our  situation,  but  this  scheme 
also  requires  a  disinterested  and  pubhc-spirited 
leadership  which  has  been  lacking. 

The  English  example  has  been  strong 
enough,  however,  in  spite  of  these  considera- 
tions, to  give  the  trustee  system  a  rootage  here, 
and  from  about  1820  to  the  present  it  has  ex- 
perienced a  continuous  growth.  And  it  is  con- 
sidered by  Americans,  whose  experience  gives 
them  the  right  to  speak,  as  best  suited  to  our 
conditions.  ^ 

According  to  the  New  York  plan,  which  is 
fairly  typical,  the  first  step  in  the  organization 
of  a  savings  bank  is  the  presentation  of  a 
petition  to  the  State  Superintendent  of  Banks 
signed  by  at  least  thirteen  persons,  offering 
their  services  as  trustees,  of  whom  at  least 
two-thirds  must  be  residents  of  the  county  in 
which  it  is  proposed  to  locate  the  bank.  In 
passing  upon  the  application  the  superintend- 
ent considers  such  questions  as  the  desirability 
of  the  proposed  locality,  as  to  whether  the 
population  is  sufficiently  dense  to  promise  a 
sufficient  patronage,  and  as  to  whether  the 
character  and  standing  of  the  men  offering  to 

*  Described  in  article  by  J.  P.  Townsend,  in  Sumuer's 
"  Banks  of  all  Nations  ". 


186  SAVINGS    INSTITUTIONS 

act  as  trustees  are  such  as  to  inspire  confidence 
in  the  institution.  He  reports  either  favorably 
or  unfavorably  to  the  County  Clerk.  In  the 
former  case  the  bank  must  be  opened  for 
business  within  a  period  of  a  year  from  the 
time  the  certificate  of  authorization  is  filed. 
The  board  of  trustees  is  a  perpetual  body,  with 
power  to  elect  members  to  fill  vacancies,  and 
to  employ  agents  to  conduct  the  active  work. 
In  addition  to  the  usual  causes  of  vacancy,  a 
seat  will  be  vacated  by  the  member  moving 
out  of  the  state  or  absenting  himself  from 
the  monthly  meetings  of  the  board  for  a 
period  of  six  months.  Members  of  the  board 
must  not  be  borrowers  or  surety  for  borrowers, 
and  they  must  receive  no  compensation  for 
their  services,  unless  they  are  assigned  by 
their  colleagues  to  work  which  will  require 
regular  and  faithful  attendance  at  the  bank, 
or  to  act  as  appraisers. 

The  requirement  in  New  York  that  a  deposit 
account  must  not  exceed  $3,000  is  not  an 
effectual  measure  for  excluding  the  better 
conditioned  classes,  since  there  is  no  penalty 
against  one  person  keeping  accounts  in  a  num- 
ber of  banks,  and  it  is  possible  to  distribute 
quite  a  fortune  among  a  number  of  associa- 
tions. This  custom  has  without  doubt  a  con- 
siderable vogue. 


TRUSTEE  SAVINGS  BANKS        187 

The  funds  of  New  York  savings  banks  may 
be  invested  in  United  States  bonds ;  the  bonds 
of  New  York  state ;  the  bonds  of  other  states 
which  have  not  defaulted  in  the  payment  of 
their  debts,  either  principal  or  interest,  within 
ten  years;  the  stock  and  bonds  of  the  cities 
of  New  York ;  the  stock  and  bonds  of  certain 
other  specified  cities;  bonds  secured  by  first 
mortgages  on  real  estate  for  fifty  per  cent  of 
its  value,  if  productive,  and  for  forty  per  cent 
if  unproductive ;  and  on  certain  specified  rail- 
way securities.  Among  the  incidents  of  this 
hberal  policy,  two  principal  ones  may  be  men- 
tioned. First,  money  loaned  for  investment 
and  improvement  of  homes.  The  smaller 
class  of  loans  aggregate  about  eighty  per  cent 
of  the  real  estate  mortgage  loans.  Second, 
in  lowering  the  rates  on  public  loans.  This 
tendency  has  been  thus  explained :  "In  1893, 
from  statements  obtained  from  the  office  of 
the  State  Comptroller,  and  from  the  report  of 
the  Bank  Superintendent,  it  appeared  that  the 
total  net  indebtedness  of  cities  in  this  state 


188  SAVINGS    INSTITUTIONS 

was  $170,343,847,  of  which  the  savings  banks 
carried  $120,787,970.  The  logical  result  has 
been  that  in  ordinary  times  municipalities  of 
approved  credit  and  standing  have  been  able 
to  borrow  money  to  carry  on  public  improve- 
ments at  rates  of  interest  but  little  exceeding 
the  interest  obtainable  upon  government 
bonds. ' '  ^ 

To  provide  against  losses  from  any  cause  the 
trustees  have  authority  to  gradually  accumu- 
late a  surplus  equal  to  fifteen  per  cent  of  the 
total  deposits ;  and  in  determining  the  amount 
of  surplus,  the  securities  must  be  estimated 

1  From  address  of  Charles  L.  Stone,  Esquire,  at  the  laying 
of  the  corner  stone  of  the  Onondaga  County  Savings  Bank 
Building,  at  Syracuse,  November  5th,  1896,  and  published  in 
the  History  and  Manual  of  the  Onondaga  County  Savings 
Bank. 

Dividends  are  declared  each  year,  and  at  least  once  every 
third  year  the  earnings  which  liavc;  accumulated  above  fifteen 
per  cent  must  be  distributed  among  tlie  depositors  as  a  special 
dividend,  and  they  may  classify  the  depositors  to  determine 
their  shares  in  the  regular  dividend  apportionmonts.  The 
rate  of  interest  paid  to  depositors  has  naturally  fallen.  For 
example,  the  Syracuse  Savings  banks  in  1898  reduced  the 
interest  on  all  deposits  exceeding  $.■)()()  in  amount  from  four  to 
three  and  one-half  per  cent,  and  since  then  the  lower  rate  has 
been  extended  to  all  accounts. 


TRUSTEE  SAVINGS  BANKS        189 

at  not  more  than  their  par  value  and  at  their 
market  value  when  they  are  below  par.  The 
state  thus  safeguards  the  interests  of  depositors 
against  the  mismanagement  of  the  trustees  or 
of  salaried  officials ;  and  in  addition  to  this,  it 
gives  the  savings  banks  a  preferred  claim 
against  state  banks  and  trust  companies,  in 
the  case  of  their  bankruptcy. 

A  glance  at  the  table  for  the  United  States  on 
the  following  page  will  indicate  a  progressive 
movement  of  our  institutional  savings,  that 
is,  if  the  institution  is  considered  apart  from 
the  want  which  it  is  designed  to  supply. 

The  unfavorable  column  in  this  table  is  that 
showing  the  number  of  banks  for  the  different 
years.  It  will  be  seen  at  a  glance  that  the 
total  number  has  always  been  insignificant  as 
compared  with  the  population  to  be  served 
and  the  territory  to  be  covered,  for  if  these 
banks  had  been  evenly  distributed  in  1900, 
there  would  have  been  one  for  every  76,152  of 
the  population. 

The  total  number  of  banks  has  been  a  most 


190 


SAVINGS    INSTITUTIONS 


Number  o  f 

Nu7nber  of  de- 

Average  due 

Tears 

Banks 

pogitors 

Deposits 

each  depos'r 

1820 

10 

8,635 

$        1,138,576 

$131.86 

1830 

36 

38,085 

6,973,304 

183.09 

1840 

61 

78,701 

14,051,520 

178.54 

1850 

108 

251,354 

43,431.130 

172.78 

1855 

215 

431,602 

84.290,076 

195.29 

1860 

278 

693,870 

149,277.504 

215.18 

1865 

317 

980,844 

242.619,382 

247.35 

1870 

517 

1,630,846 

549,874,358 

337.17 

1875 

771 

2,359,864 

924,037,304 

391.56 

1876 

781 

2,368,630 

941,350,255 

397.42 

1877 

675 

2,395,314 

866,218,300 

361.63 

1878 

663 

2,400,785 

879,897,425 

366.50 

1879 

630 

2,268,707 

802,490,298 

353.73 

1880 

629 

2,335,582 

819,106,973 

350.71 

1881 

629 

2,528,749 

891,961,142 

353.73 

1883 

629 

2,710,354 

966,797,081 

356.70 

1883 

630 

2,876,438 

1,024,857,787 

356.29 

1884 

636 

3,015.151 

1,073,294,955 

355.96 

1885 

646 

3.071,495 

1.095,172,147 

356.56 

1886 

638 

3,158,950 

1,141,530,578 

361,36 

1887 

684 

3.418,013 

1.235.247,371 

361.39 

1888 

801 

3,838,291 

1,364,196,550 

355.41 

1889 

849 

4,021,523 

1.425.230,349 

354.40 

1890 

921 

4,258,893 

1,524,844,506 

358.03 

1891 

1,011 

4,533,217 

1,623,079,749 

358.04 

1892 

1.059 

4,781,605 

1,712.769,026 

358,20 

1893 

1,030 

4,830,599 

1.785.150.957 

369.55 

1894 

1,024 

4,777,687 

1,747.961,280 

365.86 

1895 

1,017 

4,875,519 

1,810,597,023 

371.36 

1896 

988 

5.065,494 

1,907,156.277 

376.50 

1897 

980 

5,201,132 

1,939.376.035 

372.88 

1898 

979 

5,385,746 

2.065.631,298 

383.54 

1899 

987 

5,687,818 

2,230,366,9.54 

392.13 

1900 

1,002 

6.107,083 

2.449,547,805 

401.10 

TRUSTEE   SAVINGS   BANKS  191 

uncertain  quantity.  From  1876  to  1880,  there 
was  a  steady  decline,  and  when  the  growth  of 
population  is  taken  into  account,  the  decline 
may  be  said  to  have  continued  until  the  end  of 
1883.  The  upward  tendency  was  resumed  in 
1884  and  reached  high -water  mark  in  1892, 
when  there  were  1,059  savings  banks  reported. 
From  that  time  to  1898,  there  was  again  a 
continuous  decline,  and  since  then,  there  has 
been  a  considerable  increase.  This  up  and 
down  movement  probably  indicates  the  un- 
substantial character  and  the  inefficient  man- 
agement of  the  smaller  banks.  But  it  may 
be  that  there  is  some  compensation  for  the 
shrinkage  in  the  number  of  banks  in  a  result- 
ing greater  usefulness  on  the  part  of  the  larger 
institutions.  The  large  and  strong  city  banks 
may  be  absorbing  a  larger  share  of  the  local 
business  and  even  reaching  into  the  smaller 
towns  and  receiving  deposits  through  the 
mails.  Such  facilities  as  they  can  afford  to 
the  smaller  communities,  cannot,  however,  be 
regarded  as  a  sufficient  compensation  for  the 


192  SAVINGS    INSTITUTIONS 

loss  of  the  local  bank,  and  it  can  hardly  be 
that  the  mails  are  used  by  the  poorer  and  the 
more  ignorant  classes  for  this  purpose  to  any 
considerable  extent,  ^ 

The  fact  that  the  number  of  savings  banks 
has  been  on  the  whole  increasing  does  not  of 
itself  tell  very  much.  It  may  indicate  a 
vitality  which  promises  an  increasing  extent 
of  usefulness  in  the  future,  or  it  may  indicate 
an  intensive  usefulness  at  present  within  cer- 
tain spheres,  but  nothing  definite  can  be  de- 
termined save  by  the  light  of  a  more  detailed 
study. 

In  determining  the  question  of  intensive 
and  extensive  results,  the  criterion  is  not  the 
aggregate  of  deposits  so  much  as  it  is  the  ag- 
gregate of  deposit  accounts.     And  this  is  not 

^  To  show  how  unevenly  distributed  banks  of  this  class  are, 
the  report  for  New  York  state  of  January  1st,  1901,  may  be 
taken.  It  shows  128  savings  banks  in  the  state,  but  situated 
in  only  36  out  of  a  total  of  60  counties,  and  26  of  these  were 
situated  in  New  York  county.  The  tendency  to  congregate 
in  the  more  populous  counties  is  very  marked.  Every  county 
of  over  100,000  in  population  has  at  least  one  bank.  But 
quite  a  number  of  the  neglected  counties  have  populations 
ranging  between  50,000  and  100,000. 


TRUSTEE   SAVINGS  BANKS  193 

SO  significant  as  the  aggregate  of  the  right 
class  of  accounts,  that  is  the  accounts  of  the 
persons  who  ought  to  patronize  the  savings 
bank,  but  unfortunately  we  are  not  able  to 
find  from  the  reports  what  class  of  persons 
patronize  them.  We  can  only  judge  by  the 
average  account.  If  it  is  small,  it  may  be, 
with  some  hesitancy,  presumed  that  there  are 
many  persons  of  small  means  among  the  de- 
positors. 

From  the  point  of  view  of  intensive  results, 
our  American  system  presents  a  good  record, 
and  applying  to  some  states  the  volume  of 
patronage  test,  we  discover  in  the  reports  for 
1900  some  remarkable  records.  For  example, 
the  state  of  Maine,  which  is  relatively  sparsely 
populated  and  which  is  relatively  of  low  rank 
in  point  of  urban  population,  has,  according 
to  the  official  reports,  one  savings  account  for 
every  3.8  of  the  total  population.  Still  more 
remarkable  is  the  record  of  the  Green  Moun- 
tain state,  where  the  natural  conditions  are 
even  more  hostile  to  the  development  of  suck 


194  SAVINGS    INSTITUTIONS 

institutions,  but  where  there  was  an  account 
for  every  2.8  of  the  population.  In  New 
Hampshire  there  was  an  account  for  every  3. 1 
of  the  population.  Ehode  Island  showed  a 
savings  account  for  every  3  of  her  population, 
and  Connecticut  one  for  every  2.3  of  the 
population.  Perhaps  Massachusetts  presents 
the  most  favorable  conditions  of  aU  the  states 
for  the  growth  of  this  class  of  institutions, 
since  she  has  so  long  been  distinctively  a 
manufacturing  state,  and  because  of  her  large 
urban  population,  but  one  is  not  prepared  for 
the  actual  facts.  The  report  shows  the  enor- 
mous aggregate  of  1,491,143  accounts,  or  a 
number  equal  to  a  fraction  over  fifty  per  cent 
of  the  entire  population,  or  one  account  to 
every  1.9  of  the  population. 

If  New  England  were  taken  as  a  separate 
subject  of  study,  the  figures,  as  far  as  they 
teU  anything,  relate  a  cheerful  story.  The  ag- 
gregation of  deposit  accounts  amounts  to 
2,464,377,  and  if  each  account  stood  for  a  de- 
positor just  one-half  the  population  would  be 
depositors. 


TRUSTEE   SAVINGS   BANKS  195 

In  seeking  an  explanation  of  this  remark- 
able success  of  the  trustee  system,  we  are  re- 
minded that  New  England  is  singularly  sepa- 
rate and  distinct  in  customs,  habits  and  ideals 
from  the  rest  of  the  country.  Notwithstand- 
ing the  large  foreign  population,  the  dominant 
type  is  more  homogeneous  and  more  Anglo- 
.Saxon  than  it  is  in  any  other  section,  and 
therefore  fixed  customs  have  been  more  rigid 
and  controlling.  Among  the  ideals  behind 
the  customs  and  institutions  must  be  noted  a 
stern,  Puritanical  sense  of  simple  living,  in- 
dustry and  providence,  and  this  spirit  is  so 
strong  as  to  be  well  calculated  to  give  color 
and  direction  to  the  philanthropic  impulse. 
There  is  also  an  unusual  amount  of  public 
spirit,  of  collective  rather  than  a  neighborly 
character,  as  seen  in  the  institution  of  the 
town  meetings. 

In  tracing  the  results  in  New  England,  the 
ascending  scale  was  adopted.  But  in  study- 
ing the  institution  in  America  as  a  whole  the 
^descending  scale  will  be  followed  since  that 


196  SAVINGS    INSTITUTIONS 

method  seems  best  to  tell  the  story  for  the 
country. 

In  the  territorial  division  generally  known 
as  the  Eastern  States,  very  different  conditions 
are  found  than  in  New  England.  ^  Here  one 
of  the  most  striking  contrasts  is  the  difference 
between  the  maximum  record  and  the  general 
average;  in  New  York  there  was  a  deposit 
account  to  every  3.5  of  the  population,  while 
in  all  the  Eastern  States  combined,  the  rates 
was  one  to  6.  The  high  record  in  New  York 
is  possibly  traceable  to  the  sturdy  Dutch  spirit 
in  the  economic  life  operating  upon  a  large 
urban  population. 

The  sudden  drop  to  the  records  of  the  other 
states  is  not  so  easy  to  explain.  These  are, 
in  proportion  to  population:  Maryland,  1  to 
16;  Delaware,!  to  9.1;  New  Jersey,  1  to  9.2; 
Pennsylvania,  1  to  17.4;  and  the  District  of 
Columbia,  1  to  84.  The  explanation  may  be 
found  in  part  in  the  heterogeneous  character 

*  New  York,  New  Jersey,  Delaware.  Maryland,  Pennsyl- 
vania, and  the  District  of  Columbia  comprise  the  eastern  states. 


TRUSTEE  SAVINGS  BANKS        197 

of  the  people,  for  no  sectional  sentiment  or 
tradition  may  be  said  to  exist.  Eace  influ- 
ences have  operated  here  very  diif erently  from 
in  New  England,  for  the  section  has  been,  as 
a  whole,  more  commercial  and  less  ethical,  at 
least,  less  Puritanical.  And  the  stream  of 
foreign  population,  wholly  acquisitive  and 
self-seeking  in  its  constituent  elements,  has 
rendered  more  worldly  a  class  already  well 
removed  from  Puritanism.  The  philanthropic 
hfe  has  therefore  been  weaker  and  general 
public  spirit  has  been  less  strong. 

In  the  rest  of  the  country,  the  savings  bank 
development  has  been  quite  insignificant.  To 
throw  the  rate  of  regression  into  as  clear  a 
light  as  possible,  let  us  take  the  proportion  of 
patrons  to  population  in  the  different  sections, 
and  we  have,  in  New  England,  1  to  2 ;  East- 
ern States,  1  to  6;  Middle  States,  1  to  48; 
Southern  States,  1  to  306  and  Western  States 
1  to  18.  These  figures  very  clearly  suggest 
the  existence  of  large  sections  that  are  wholly 
neglected.     This  is  confirmed  by  the  absence 


198  SAVINGS    INSTITUTIONS 

of  any  reports  from  several  states.  Michi- 
gan, Missouri,  Arkansas,  Kansas,  Nebraska, 
Georgia,  Mississippi,  the  two  Dakotas,  Mon- 
tana, Idaho,  Oregon,  Wyoming,  Colorado, 
Nevada,  Arizona,  and  New  Mexico,  make  no 
reports.  And  in  the  other  states,  the  propor- 
tion to  the  population  varies  enormously,  as  in 
the  South,  the  proportion  of  depositors  to  the 
population  was  highest  in  West  Virginia, 
where  it  was  1  to  48,  and  lowest  in  Texas, 
where  it  was  1  to  1,023;  and  between  these 
extremes  the  rates  were :  South  Carolina,  1  to 
53;  Tennesee,  102 ;  Louisiana,  1  to  131;  North 
Carolina,  1  to  221 ;  and  Florida,  1  to  602.  It 
was  1  to  13  in  Iowa;  1  to  23  in  lUinois;  1  to 
40  in  Minnesota;  1  to  41  in  Ohio;  1  to  118 
in  Indiana;  and  1  to  202  in  Wisconsin.  In 
California  it  was  1  to  16 ;  and  in  Utah  1  to  42. 
The  reasons  for  the  neglected  conditions  in 
the  South  and  West  may  be  found,  first,  in 
the  absence  of  any  religious  motive  for  the 
immigration  into  those  sections;  second,  in 
the  exclusive  economic  motive  in  the  West; 


TRUSTEE  SAVINGS  BANKS        19^ 

and  third,  in  the  preponderence  of  agriculture 
among  the  employments.  The  last,  however, 
is  in  some  sections  a  changing  element.  The 
discovery  of  natural  gas  in  parts  of  Ohio  and 
in  a  large  belt  of  Indiana  has  created  a  radical 
readjustment  of  our  industrial  geography. 
And  the  changing  conditions  must  call  in  the 
future  for  a  systematic  cultivation  of  the  sav- 
ing habit.  Especially  is  this  true  of  Chicago, 
whose  rapid  growth  has  been  so  largely  aug- 
mented by  a  foreign  element. 

We  may  enumerate  as  the  chief  causes  of 
the  extreme  backwardness  of  the  South,  the 
general  industrial  prostration  due  to  the  civil 
war;  general  ignorance  of  banking  functions 
due  to  the  staple  character  of  the  agricultural 
products  (banking  interests  thrive  under  a 
versatile  industry,  where  a  subsidence  of  de- 
mand for  money  in  one  is  accompanied  by  a 
rise  in  another) ;  and  the  extreme  improvidence 
of  the  blacks,  who  in  savageryfirst  and  in  slav- 
ery later  were  not  in  a  position  to  develop  an 
appreciation  of  property. 


•200  SAVINGS    INSTITUTIONS 

It  is  in  the  interest  of  the  negro  that  cul- 
ture in  savings  is  most  to  be  desired.  The 
weakest  point  in  the  negro  is  his  low  concep- 
tion of  property,  and  this  has  most  to  go  with 
making  him  ignorant,  dishonest  and  immoral. 
The  blacks  are  not  a  degenerate  people,  to  be 
restored  to  a  strength  which  they  have  lost, 
but  they  have  yet  to  evolve  out  of  a  lingering 
savagery ;  they  have  not  yet  fully  reached  the 
civilized  concept  of  rights  of  person  and  prop- 
erty. They  cannot  be  fully  civilized  until  they 
have  been  imbued  with  a  controlling  ambition 
to  acquire  property  legitimately.  The  savings 
bank  would  be  admirably  adapted  to  accom- 
plish this,  but  there  seem  to  be  insuperable 
difficulties  in  the  way  of  extending  trustee 
banks  to  the  South.  Suitable  persons  to  act 
as  trustees  are  not  to  be  found.  This  is  not 
because  of  either  a  lack  of  ability  or  a  lack 
of  willingness  on  the  part  of  the  white  people 
to  serve  the  blacks  in  this  way.  The  white 
planter  has  a  genuine  interest  in  the  well- 
being  of  the  blacks,  and  the  peculiar  history 


TRUSTEE   SAVINGS   BANKS  201 

of  the  South  has  created  much  of  the  social 
spirit  among  the  whites  which  is  characteris- 
tic of  the  courtly  countries  of  Europe.  But 
this  kindly  spirit  wiU  not  find  employment  as 
trustees  for  the  blacks  because  of  their  un- 
fortunate prejudices  and  suspicions. 

Whether  or  not  the  trustee  system  can  thrive 
in  the  South  is  yet  to  be  proven,  for  the  pres- 
ent record  is  discouraging  enough.  We  may 
attribute  its  backwardness  to  the  general  in- 
dustrial prostration  growing  out  of  the  Civil 
War;  to  a  prevailing  ignorance  of  banking 
functions,  (for  even  commercial  banks  have 
had  a  very  stunted  growth  in  the  plantation 
regions) ;  and  to  the  extreme  improvidence  of 
the  blacks  (for  the  statue  of  slavery  did  not  pre- 
pare them  for  any  appreciation  of  property). 
As  animate  property  themselves  they  were  not 
in  a  position  to  appreciate  the  character  of 
inanimate  property,  and  they  derived  little 
sense  of  property  from  the  state  of  savagery 
from  which  they  originally  came.  Consider- 
ing his  disadvantages  the  black  man  may  be 


202  SAVINGS    INSTITUTIONS 

said  to  have  made  no  mean  advance  in  the 
economic  arts.  Included  in  the  signs  of  ad- 
vance must  be  mentioned  the  gospel  of  win- 
ning recognition  through  economic  success, 
(this  to  be  realized  through  sacrificing  tobacco 
and  whiskey  and  idleness  for  a  two-roomed 
cabin  and  a  farm),  which  is  being  enforced 
both  by  precept  and  example  in  the  new 
movement  represented  by  Booker  T.  Wash- 
ington and  others. 

The  economic  and  industrial  problems  of  the 
West  are  due  chiefly  to  the  speculations  at- 
tending its  settlement.  The  sudden  rise  of 
value  due  to  immigrations  has  engendered  a 
spirit  of  speculation  which  has  become  well- 
nigh  universal.  People  who  are  accustomed 
to  witness  fortunes  grow  in  a  day,  are 
likely  to  lose  patience  with  the  slow  process 
of  carving  out  industrial  careers  by  dint  of 
hard  labor  and  close  economy.  This  specu- 
lative spirit  has  led  to  many  miscalculations  as 
to  economic  resources ;  enterprises  and  settle- 
ments have  been  planned  and  started  without 


TRUSTEE  SAVINGS  BANKS        203 

any  adequate  basis  in  the  natural  conditions; 
and  tides  of  ephemeral  prosperity  may  almost 
be  said  to  pass  in  a  night.  Agriculture  has 
been  attempted  upon  totally  insufficient  in- 
formation as  to  the  character  of  the  soil  and  the 
supply  of  moisture,  resulting  in  general  dis- 
tress throughout  large  sections ;  and  petitions 
for  relief  to  the  Federal  Government,  and  to 
the  state  governments  and  to  private  philan- 
thropy, have  from  time  to  time  naturally 
flowed  from  such  situations. 

The  booming  proclivities  of  Western  real 
estate  men  have  advertised  and  practically  de- 
veloped cities  on  a  metropolitan  plan  where 
there  was  no  possible  chance  of  their  being 
supported  by  the  contributing  territory,  andy 
as  a  consequence  of  these  things,  the  Western 
people  have  become  familiar  with  bankruptcy, 
commercial  disaster  and  industrial  stagnation 
in  large  sections  and  in  populous  communities. 
During  the  developing  stage  the  situation  was 
sometimes  reheved  by  the  opening  up  of  new 
sections,  the  new  regions  providing  a  drainage 


204:  SAVINGS    INSTITUTIONS 

and  an  outlet  for  the  plethora  of  people  and 
enterprise  in  the  lately  worked  section  or  city. 
Such  outlets  no  longer  exist,  and  the  West 
may  be  described  as  in  the  pains  of  the  birth 
of  a  new  order.  This  new  order  requires  that 
the  resistless  energy  be  organized  along  con- 
servative lines,  if  the  section  is  to  realize  its 
possibilities,  and  the  conditions  call  for  every 
aid  that  can  be  rendered  to  accomplish  this 
end.  One  of  the  first  things  required  must  be 
a  reliance  upon  themselves  for  the  capital 
which  they  have  been  borrowing  from  the 
East.  The  individuals  have  been  accustomed 
to  seek  fortunes  in  the  rise  of  value  where  no 
tangible  capital  is  employed,  but  they  must 
henceforth  seek  them  out  of  capital  which  has 
grown  in  the  natural  and  orderly  way,  out  of 
their  savings. 

It  will  be  seen  at  once  how  inadequate  is 
the  trustee  savings  bank  system  to  their  con- 
dition. The  spirit  of  saving  has  received  too 
little  development  among  all  classes  to  provide 
the  right  kind  of  material  for  the  safe  direc- 


TRUSTEE  SAVINGS  BANKS       205 

tion  of  trustee  banks.  And  another  obstacle 
is  found  in  the  absence  of  the  spirit  and  energy 
for  local  initiative  in  this  line.  There  are  no 
traditions,  customs,  or  sentiments  to  consti- 
tute the  germ  of  a  trustee  savings  bank  system. 

The  municipal  savings  banks  would  hardly 
be  more  adapted  to  the  needs  than  the  trustee 
banks,  for  the  town  governments  have  no 
more  competency  for  such  service  than  have 
the  municipalities  of  other  sections.  They 
may  have  even  less  because  of  the  greater 
prevalence  of  speculative  schemes. 

Among  private  agencies  stock  companies 
might  come  nearer  meeting  the  wants  of  the 
people  than  any  other.  They  supply  the  com- 
mercial motive  which  is  essential  to  induce 
the  interest  of  the  leading  citizens ;  but  even 
these  could  not  insure  one  of  the  prime 
requisites  of  a  wholesome  savings  system, 
extra  security  of  deposits.  Indeed  specu- 
lative tendencies  place  more  or  less  ia  jeopardy 
the  deposits  in  all  kinds  of  banking  institu- 
tions;   the    frequency    of    commercial    bank 


206  SAVINGS    INSTITUTIONS 

failures  is  due  to  it,  and  there  is  no  assurance 
that  the  directors  and  managers  of  stock  sav- 
ings banks  would  not  yield  to  the  same  force. 
In  the  states  where  savings  banks  have  made 
the  least  progress  there  is  generally  found  a 
lack  of  adequate  legislation,  and  often  no  pro- 
vision for  their  organization  and  management. 
During  Mr.  Wanamaker's  term  as  Postmaster- 
General,  he  sent  letters  to  the  governors  of  the 
different  states  inquiring  as  to  the  state  laws 
regulating  savings  banks,  and  the  following 
among  the  replies  suggests  the  general  back- 
wardness of  the  American  states  in  this 
regard : 

South  Carolina — The  banks  in  the  state 
are  governed  by  the  terms  of  their  charter 
alone. 

Maryland — The  laws  are  very  meager. 
The  affairs  of  the  concern  must  be  examined 
annually  by  a  committee  of  the  directors,  and 
their  report  published.  The  bank  is  also  sub- 
ject to  examination  by  the  state  treasurer  at 
any  time. 

Minnesota — There  are  no  laws  directly  re- 
lating to  private  banks,  the  attempted  legisla- 
tion of  1887  in  regard  to  such  banks  having 


TRUSTEE   SAVINGS   BANKS  207 

failed  to  become  law  for  lack  of  constitutional 
majority  in  the  legislature. 

Nevada — There  is  no  officer  superintending 
to  whom  questions  can  be  referred. 

Mississippi — The  private  or  savings  banks 
may  be  conducted  by  individuals  or  may  be 
incorporated  under  the  general  laws  of  the 
state.  There  is  no  restriction  as  to  capital  or 
ownership  of  property. 

Kentucky — There  are  no  general  banking 
laws;  all  bank  charters  are  granted  by  the 
legislature,  each  with  its  own  especial  privi- 
leges, an  evil  which  it  is  hoped  will  be  remedied 
by  the  constitutional  convention  now  in  ses- 
sion in  this  city, — Frankfort. 

Michigan — There  is  no  law  governing  pri- 
vate banks  in  this  state. 

South  Dakota — We  have  no  banking  law. 
Banks  hke  all  other  corporations,  are  allowed 
under  our  general  incorporation  laws,  and 
they  are  not  subject  to  any  limitation  other 
than  would  apply  to  any  moneyed  corporation. 
Banks  may  also  be  operated  without  incor- 
porating. The  latter  are  not  under  any  state 
supervision.  The  former  are  under  super- 
vision, a  pubhc  examiner  being  authorized  to 
visit  each  corporation  once  a  year  and  ascer- 
tain its  condition.  The  examiner  has  but  little 
power  under  the  law,  yet  the  examination 
and  publication  of  the  annual  reports  have  a 
wholesome  effect  upon  the  banks. 

Oregon — Private  banks  may  be  incorporated 


208  SAVINGS    INSTITUTIONS 

under  the  general  laws  of  the  state,  but  there 
is  no  legislation  specially  regulating  the  aif  airs 
of  such  banks  or  authorizing  any  officer  to 
enquire  into  their  condition.  The  only  ex- 
ception to  this  statement  is  that  tax-assessors 
have  the  power  to  make  the  usual  inquiries 
respecting  taxable  property. 

Texas — The  creation  of  corporations  for 
banking  purposes  is  inhibited  by  the  constitu- 
tion of  this  state.  We  have  no  statutes  re- 
lating to  private  banks. 

Kansas — Private  banks  are  not  controlled 
or  restricted  by  the  legislation  of  this  state. 
Savings  banks  are  controlled  by  legislation  only 
so  far  as  to  compel  them  to  obtain  a  charter, 
to  file  a  certificate  of  incorporation,  giving 
the  name  and  the  amount  of  the  stock  to  each 
share-holder,  and  to  make  sworn  semi-annual 
statements  of  their  financial  condition.  The 
business  affairs  of  a  savings  bank  in  this  state 
are  controlled  entirely  by  its  board  of  directors. 

Mr.  Wanamaker  also  gives  some  interesting 
statistics  to  show  the  insecurity  of  deposits 
under  the  present  system,  or  want  of  system. 
Comparing  the  records  of  national  with  those 
of  private  banks  in  proof  of  the  wisdom  of 
the  degree  of  oversight  which  the  general 
government  exercises  over  the  national  banks, 
he  says: 


TRUSTEE  SAVINGS  BANKS  209 

"From  the  beginning  of  the  national  bank- 
ing system  until  1879,  a  period  of  sixteen 
years,  only  eighty-one  national  banks  had  be- 
come insolvent,  and  the  estimated  losses,  all 
told,  were  $6,240,189.  It  is  stated  in  the 
publication  on  the  subject  that  fifty-five  banks 
operating  under  the  systems  in  vogue  prior  to 
the  national  banking  system  failed  in  the 
single  year,  1841,  with  an  aggregate  capital 
of  over  $67,000,000.  And  it  is  also  recorded 
that  in  nearly  every  instance  the  entire  capi- 
tal of  the  banks  which  failed  was  lost.  The 
losses  incident  to  three  failures  of  private 
banking  firms  prior  to  1879  were  equal  to  the 
total  losses  which  had  up  to  that  time  occurred 
under  the  national  system.  During  three 
years  ended  1879,  January  1st,  the  failures  of 
state  and  savings  banks  and  private  banks  in 
twenty-three  states  numbered  210,  with  losses 
amounting  to  $32,616,661.  The  average  an- 
nual losses  to  creditors  by  the  insolvency  of 
national  banks  during  the  sixteen  years  prior 
to  1879  was  $390,012,  while  that  occasioned 
by  the  failure  of  banks  other  than  national 
was  for  three  years  prior  to  1879  not  less  than 
$10,872,220  per  annum.  The  report  of  the 
comptroller  of  the  currency  for  1879  shows 
that  in  the  states  of  Ohio  and  Illinois  alone 
the  losses  in  three  years  through  the  failure  of 
state,  savings,  and  private  banks  and  bankers 
aggregated  over  $8,000,000,  of  which  about 
$2,000,000  were  in  Ohio  and  about  $6,000,000 
in  Illinois,  the  total  losses  in  these  two  states 
being  greater  by   $1,798,913,  than   the   total 


210  SAVINGS    INSTITUTIONS 

losses  to  creditors  by  all  the  national  bank  fail- 
ures which  have  ever  occurred. " 

The  reports  of  American  savings  banks  are 
universally  brief,  and  in  making  them  the 
managers  seem  not  to  understand  what  the 
friends  of  this  class  of  institution  wish  to 
know.  This  failure  contains  the  suggestion 
that  they  may  not  clearly  enough  distinguish 
between  this  class  of  an  institution  and  the 
commercial  bank,  and  perhaps  that  they  do 
not  direct  their  efforts  to  the  development  of 
saving  power.  This  kind  of  a  study  could  be 
prosecuted  much  more  effectually  if  a  record 
were  kept  of  the  occupations  of  depositors 
and  if  these  were  given  in  the  published  re- 
ports; or  if  the  public  were  apprised  of  its 
different  classes  of  depositors  according  to  the 
amounts  of  the  accounts. 

The  following  classifications  for  the  states 
of  Maine  and  Connecticut  reported  to  the 
Comptroller  of  the  Currency  in  1898  seem  to 
be  all  that  are  now  available. 


TRUSTEE  SAVINGS  BANKS        211 

Depositors  Deposits 

Maine  Number     Per  Cent         Amount     Per  Cent 

1500  or  less 129,865      77.30  i 

Over  $500  and  less  than  {  $48,314,077      80.9 

$3,000 33,558      30       ( 

Over  $3,000 4,456        3.70      11,384,373      19.1 

Total .167,879  59,598,349 

Connecticut 

$1,000  or  less 330,149      87.31      63,195,480      40.52 

Over  $1,000  and  less  than 

$3,000 32,313        8.81      43,505,536      27.35 

Over  $2,000  and  less  than 

$10,000 13,964        3.81      46,869,038      30.05 

$10,000  or  over 235  07        3,399,744        3.18 

Total  366,661  155,969,798 

Neither  of  these  classifications  is  very  satis- 
factory, for  the  reason  that  the  amounts  due 
to  the  lowest  classes  mentioned  are  too  large 
to  tell  much  of  the  work  among  the  very 
smaU  depositors.  The  table  does,  however, 
make  it  clear  that  the  Connecticut  banks  are 
serving  as  investment  societies  for  the  small 
capitahst  classes.  Of  the  87.31  per  cent  of 
the  patrons  who  have  deposits  ranging  within 
11,000  each,  a  considerable  number  are  doubt- 
less not  of  the  working  class;  and  of  the 
owners  of  accounts  ranging  upwards  of  $1,000 
it  is  probable  that  a  very  smaU  proportion  be- 
long to  the  working  class ;  and  of  those  whose 


212  SA-VINGS  INSTITUTIONS 

accounts  exceed  $2,000  it  may  be  assumed 
that  nearly  all  belong  to  the  capitalist  class. 

The  American  savings  banks  have  had  an 
advantage  over  the  English  trustee  system  in 
being  allowed  a  wider  range  of  choice  in  the 
investment  of  funds,  which  has  enabled  them 
to  pay  a  higher  rate  of  interest.  The  most 
popular  class  of  loans  has  been  on  real  estate 
mortgages;  and  the  report  for  1899  shows  that 
of  the  total  loans,  amounting  to  $1,098,598,- 
589,  there  were  $878,126,859  loaned  on  real 
estate  security  and  $512,777,336  invested  in  the 
bonds  and  stocks  of  municipalities ;  there  were 
$167,998,336  in  railroad  stocks  and  bonds,  and 
only  $136,930,208  invested  in  United  States 
bonds. 

The  trustee  banks  in  America  lack  the  con- 
fidence enjoyed  by  a  state  system  in  times  of 
industrial  depression.  In  such  times  capital 
seeks  safe  investment  and  security  becomes  of 
greater  importance  than  revenue.  For  in- 
stance, it  is  at  such  times  that  government 
securities  become  most  popular,  while  private^ 


TRUSTEE  SAVINGS  BANKS        213 

tend  to  decline  in  value.  It  is  on  the  same 
principle  that  deposits  in  a  state  bank  are  re- 
garded with  unusual  favor  in  times  of  com- 
mercial distress.  A  trustee  bank,  conserva- 
tively managed,  should  enjoy  greater  confi- 
dence than  commercial  banks,  for  the  reason 
that  its  funds  are  loaned  upon  securities  less 
elastic  in  value  and  especially  for  the  reason 
that  personal  security  is  not  accepted.  There 
is,  however,  a  certain  shrinkage  in  the  values 
of  the  securities  held  by  the  American  savings 
banks,  which  might,  in  exceptional  instances, 
entail  loss  to  depositors ;  a  degree  of  precarious- 
ness  might  at  such  times  result  from  inatten- 
tion of  trustees  or  from  the  greater  likelihood 
of  dishonesty  on  the  part  of  officials.  During 
the  panic  of  1893  and  1894,  there  was  a 
shrinkage,  both  in  the  volume  of  business  and 
of  the  number  of  depositors  in  savings  banks, 
and  the  shrinkage  in  the  years  1878  and  1879 
may  be  accounted  for  on  the  same  ground. 

The  situation  in  America  may  be  thus  sum- 
marized:   The  trustee  savings  bank  shows  a 


214  SAVINGS   INSTITUTIONS 

thrifty  growth  under  favoring  conditions,  but 
such  conditions  are  confined  to  a  relatively- 
small  section  of  the  country.  The  facilities 
for  saving  are  not  available  in  the  greater  part 
of  our  territory  nor  to  the  vast  majority  of 
our  people,  and  they  are  not  likely  to  be  under 
any  voluntary  system.  How  small  a  propor- 
tion of  the  total  population  come  under  the 
influence  of  the  savings  bank  may  be  seen 
when  we  consider  that,  while  the  center  of 
population  is  in  the  neighborhood  of  Indianapo- 
lis, the  center  of  savings  bank  patronage  must 
be  somewhere  in  the  neighborhood  of  Spring- 
field, Massachusetts.  Vast  areas  including 
great  states  have  no  facilities  of  this  kind,  and 
there  is  scarcely  a  doubt  that  neglected  locali- 
ties will  be  found  in  all  parts  of  the  country. 
Speaking  broadly  we  may  say  that  New  Eng- 
land has  a  well  developed  system,  the  Eastern 
states  have  made  a  beginning,  and  the  prog- 
ress in  the  rest  of  the  country  is  scarcely 
worth  mentioning. 

What  might  be  called  the  employer's  move- 


TRUSTEE  SAVINGS  BANKS        215 

ment,  that  is  the  manifestation  of  interest  on 
the  part  of  employers  in  the  welfare  of  their 
employees,  as  witnessed  in  the  insurance 
schemes,  profit  sharing,  etc.,  logically  includes 
the  savings  bank.  It  frequently  happens  both 
in  Europe  and  in  America  that  employers  in 
large  industries,  either  on  their  own  motion 
or  at  the  suggestion  of  their  employees,  take 
the  savings  of  the  latter,  and,  either  pay  in- 
terest on  them  as  borrowers,  or  place  them 
out  at  interest  as  agents.  This  is  a  most 
natural  arrangement ;  the  employees  naturally 
hold  the  business  judgment  of  their  employers 
in  high  esteem,  and  they  are  likely  to  lack 
confidence  in  their  own  judgment  as  to  busi- 
ness affairs.  As  industry  has  grown  in  vol- 
ume, and  developed  into  larger  aggregations 
of  men  and  capital  this  custom  develops  into 
a  kind  of  institution ;  it  grows  into  a  bond  of 
union,  taking  the  place,  in  a  measure,  of  the 
personal  relation  which  has  passed  away. 
The  sympathy  between  the  different  classes  in 
the  industrial  scheme  has   to    some  extent 


216  SAVINGS    INSTITUTIONS 

assumed  this  organized  form,  and  we  find 
large  industrial  undertakings  acting  as  agents 
for  their  employees  in  the  custody  and  admin- 
istration of  their  savings,  furnishing  the  cleri- 
cal service  and  giving  their  own  time  and 
attention  without  any  charge  to  the  men. 
This  scheme  is  admirably  adjusted  to  the  or- 
ganization of  a  commercial  institution,  and 
the  funds  can  be  administered  at  a  mimimum 
of  cost,  the  present  office  force  often  being 
sufficient  for  the  purpose.  It  has  the  further 
advantage  of  being  under  the  administrative 
care  of  men  of  great  commercial  skill  and 
keenness. 

From  the  standpoint  of  the  employees  it 
has  some  very  decided  advantages,  and  chief 
among  them,  perhaps,  is  the  lessened  tempta- 
tion to  spend  the  amount  purposed  to  be  saved ; 
the  peril  attending  the  wages  of  the  laborer 
after  they  have  been  paid  to  him,  and  until  he 
has  deposited  them  in  the  regular  savings 
bank,  will  be  eliminated.  In  payment  of 
wages  the  amount  due  may  be  at  once  placed 


TRUSTEE  SAVINGS  BANKS        217 

to  the  credit  of  the  employee  in  the  savings 
bank,  and  instead  of  withdrawing  the  full 
amount  he  leaves  that  which  he  intends  to 
lay  by. 

This  kind  of  savings  institution  has  made 
extensive  progress  among  the  factories  of 
Germany  under  the  name  of  Factory  Savings 
banks,  or  Fabriksparkasse,  which  are  of  two 
classes,  the  voluntary  and  the  compuslory.  ^ 
In  the  first  class  the  employer  may  pay  his 
hands  in  certificates  of  deposit  in  the  savings 
bank  connected  with  the  business,  but  the  em- 
ployee may  immediately  draw  it  out  if  he  de- 
sires. In  the  second  class  the  em  ployer  requires 
that  a  certain  per  cent  of  the  wages  be  left  on 
deposit  for  a  definite  length  of  time.  The  ma- 
jority of  firms  adopt  the  voluntary  system, 
often  offering  inducements  to  the  workmen  to 
save,  as  in  one  case,  where  the  firm  would  add 
to  the  deposit  five  per  cent  of  the  amount  of  the 
employee's  wages  after  he  had  regularly  de- 

^  See  F.  Hitze  in  "  Pflichten  und  Aufgaben  der  Arbeitgeber  in 
der  Arbeiterfvage"  ;  and  Dr.  Post  in  ''  Musterstddten". 


218  SAVINGS    INSTITUTIONS 

posited  that  percentage  of  his  average  wage 
for  a  certain  length  of  time.  Another  firm 
promised  its  workmen  that  whoever  deposited 
one  mark  per  month  for  ihe  year  should  re- 
ceive at  its  close  twelve  marks  additional.  In 
factory  savings  banks  the  interest  paid  is  usu- 
ally high — in  many  cases  six  per  cent,  and  oc- 
casionally higher.  If  the  money  does  not 
earn  so  much  the  difference  is  made  up  by  the 
firm.  1 

The  savings  bank  feature  of  the  Relief  De- 
partment of  the  Baltimore  and  Ohio  Railroad 
Company  is  a  very  successful  illustration  of 
this  principle.  It  is  the  design  of  the  com- 
pany, through  this  means,  to  induce  the  em- 
ployees to  accumulate  savings  bank  accounts, 
to  acquire  homes  of  their  own,  and  to  gener- 
ally improve    their    economic   condition.     In 

^  The  Worsted  Yarn  Spinning  Mills  of  Stela  &  Company  in 
Leipzig-Plagowitz  pay  a  regular  interest  on  deposits  of  five 
per  cent,  but  if  the  firm's  dividends  are  higher  than  that  the 
rate  of  interest  is  made  to  conform  to  the  amount  of  the  divi- 
dend. Thus  the  depositors  received  for  1886,  fifteen  per  cent; 
for  1887,  twelve  per  cent;  for  1889,  twenty  per  cent;  for  181)0, 
seven  pei'  cent;  and  for  1892,  eight  per  cent. 


TRUSTEE  SAVINGS  BANKS       219 

these  respects  a  fair  measure  of  success  has 
been  attained,  as  shown  in  the  fact  that  the 
amount  on  deposit  has  more  than  doubled 
since  1889.  This  progress  has  not  been  unin- 
terrupted, but  it  must  be  remembered  that  the 
deposit  account  is  designed  in  part  for  a  re- 
source during  emergency  periods,  and  no  doubt 
the  exceptional  reports  can  be  explained  on 
the  ground  of  some  extraordinary  distress 
among  the  men,  such  as  irregular  employ- 
ment. ^  The  interest  rate  which  the  company 
has  been  able  to  pay  to  depositors  indicates  a 
high  degree  of  skill  in  the  administration  of 
the  funds,  for  it  has  never  been  below  five  per 
cent,  and  for  several  years  past  the  dividends 
have  been  equal  to  5  J  per  cent  of  the  deposits, 
which  now  seems  to  be  the  regular  earning 
capacity  of  the  funds. 

^  The  amount  due  to  depositors  according  to  the  annual  re- 
ports for  the  different  years  since  1889  has  been: 

1889 $435,553.31  1894 $780,668.42 

1890 506,812.95  1895 856,042.74 

1891 577,429.27  1896 818,048.38 

1892 692,547.05  1897 890,472.85 

1893 830,386.06  1898 955,794.61 


220  SAVINGS    INSTITUTIONS 

This  feature  of  the  Baltimore  and  Ohio  sys- 
tem offers  to  the  employees  facilities  for  bor- 
rowing money  for  certain  purposes  as  well  as 
for  depositing  their  savings.  They  may  bor- 
row, upon  approved  security,  for  the  purpose 
of  building  homes,  or  for  the  purpose  of  buy- 
ing homes,  or  for  the  purpose  of  improving 
the  homes  which  they  already  own,  or  for  the 
purpose  of  discharging  any  mortgages  or  en- 
cumbrances which  may  be  standing  against 
their  property.  As  the  following  table  shows, 
the  number  of  loans  made  for  each  of  these 
purposes  has  been  continually  on  the  in- 
crease. 


Building 

Buying 

Improving    j 

Releasing 

Houses 

Houses 

Houses 

on  Hou 

1889 

322 

311 

76 

1890 

378 

365 

87 

201 

1891 

467 

439 

99 

248 

1892 

568 

532 

118 

274 

1893 

703 

623 

141 

309 

1894 

813 

714 

159 

329 

1895 

838 

782 

174 

365 

1896 

916 

870 

192 

416 

1897 

985 

965 

216 

477 

1898 

1088 

1082 

250 

1601 

There  are  certain  objections  to  a  system  of 
employers'  savings  banks,  which  must  be  con- 


TRUSTEE  SAVINGS  BANKS        221 

sidered  with  the  advantages.  They  may  be 
objected  to  on  the  ground  that  they  may  con- 
tain the  element  of  coercion.  It  may  be  said, 
that,  while  nominally  free  to  deposit  in  them 
or  not,  the  employee  feels  constrained  to  accept 
the  services  of  his  employer  thus  proff  erred  in 
order  to  keep  himself  in  favor.  Such  an  ob- 
jection, however,  is  not  at  all  likely  to  be  well 
founded.  A  more  valid  objection  might  be 
found  in  the  knowledge  it  would  give  to  the 
employer  of  the  private  affairs  of  the  em- 
ployee. It  is  sometimes  charged  that  employ- 
ers attempt  to  regulate  wages  according  to  an 
accepted  standard  of  living,  and  if  the  earning 
power  exceeds  that  standard  they  may  be  dis- 
posed to  lower  wages ;  and  it  is  said  that  the 
power  to  lay  by  a  considerable  sum  of  wages  is 
sometimes  taken  as  evidence  that  this  standard 
is  exceeded. 

The  system  certainly  does  not  measure  up 
to  the  highest  ideal  from  the  standpoint  of  the 
risks  to  depositors,  whom  it  subjects  to  the 
same  perils  which  attend  competitive  indus- 


222  SAVINGS    INSTITUTIONS 

tries,  a  criticism  which  does  not  apply  to 
strongly  intrenched  monopohstic  industries, 
but  which  does  apply  to  the  larger  number  of 
industrial  organizations.  And  the  danger  to 
deposits  is  likely  to  be  greatest  at  the  time 
when  they  are  most  needed,  when  factories 
are  closing  down  and  the  employees  have  need 
of  the  deposits  to  enable  them  to  tide  over  the 
season  of  unemployment. 

These  applications  of  the  trustee  principle, 
as  applied  to  savings  banks,  suggest  a  charac- 
terization appropriate  to  this  stage  in  its  his- 
tory. As  it  was  this  principle  that  carried 
savings  institutions  through  the  experimental 
stage,  so  it  may  still  be  the  best  possible  means 
for  demonstrating  new  types  and  new  features 
of  savings  institutions.  Private  philanthropy 
should  first  prove  its  claim  that  the  proposed 
method  will  prove  helpful  under  the  adminis- 
tration of  voluntary  trustees  before  an  appeal 
is  made  to  the  state,  and  before  it  is  presented 
for  adoption  to  the  larger  public. 


CHAPTER  VII 

CO-OPERATIVE   SAVINGS  BANKS 

Co-operative  banks  represent  in  their  incep- 
tion smaU  capitalists  co-operating  to  procure 
money  accommodations  on  favorable  terms. 
But  the  execution  of  the  primary  purpose  calls 
for  a  savings  bank  feature,  and  this  feature  is 
fitted  to  do  the  most  important  work  of  the 
institution — so  much  so,  that  co-operative 
banks  tend  to  differentiate  into  savings  banks 
proper  and  co-operative  loan  associations,  the 
borrowers'  interests  being  more  or  less  neg- 
lected in  the  one,  and  the  subject  of  chief  con- 
sideration in  the  other. 

Had  the  primary  motive  been  carried  out, 
however,  and  could  the  savings  department  as 
such  have  been  left  out,  the  scheme  would  stiU 
be,  in  some  sense,  a  savings  institution.  This 
idea  can  best  be  illustrated  by  a  comparison 
with  the  pawnshop  system.     The  patronage 

(223) 


224  SAVINGS    INSTITUTIONS 

of  the  pawnshop  is  a  temporary  makeshift, 
usually  to  elude  physical  want;  the  money 
borrowed  is  applied  to  a  consumptive  spend- 
ing and  it  renders  getting  ahead  more  difficult. 
The  patrons  of  the  co-operative  credit  institu- 
tion, on  the  other  hand,  borrow  for  an  increase 
of  revenue;  it  may  be  to  obtain  immediate 
possession  of  a  coveted  productive  property, 
and  in  such  case,  the  person  is  enabled,  and  in 
fact  stimulated,  to  save  in  order  to  effect  a 
complete  ownership  in  the  title.  So  the  sav- 
ing principle  is  subserved,  but  thus  far  it  applies 
only  to  a  class  which  is  comfortably  removed 
from  want.  It  is  when  borrowers  and  lenders 
are  brought  together  that  special  benefits  in  the 
way  of  proprietary  associations  accrue  to  the 
poorer  classes  of  patrons.  They  mingle  with 
people  who  have  the  proprietary  instinct,  and 
by  degrees  they  may  absorb  it  from  them. 

There  is  also  an  educational  advantage  of 
great  value  to  be  derived  from  the  conduct  of 
a  co-operative  savings  bank,  in  a  certain  prac- 
tice of  proprietorship  which  it  involves.     The 


CO-OPERATIVE   SAVINGS   BANKS  225 

members  are  responsible  for  the  selection  of 
the  right  kind  of  men  to  act  as  directors,  and 
the  directors,  in  turn,  must  exercise  business 
sense  in  the  selection  of  a  manager,  and  in 
supervising  his  work. 

An  important  distinction  between  co-opera- 
tive and  other  forms  of  savings  banks  is  the 
motive  and  character  of  the  administration; 
in  the  one  it  is  education  in  saving,  under  the 
tutelage  of  a  master;  in  the  other  it  is  a 
business  scheme.  And  the  co-operative  man 
is  not  the  very  poor  man,  and  he  is  not  the 
man  who  is  very  weak  in  saving  power.  This 
form  is  therefore  not  the  savings  bank  par 
excellence,  which  seeks  to  implant  the  saving 
spirit  where  it  is  entirely  absent,  or  to  draw  it 
out  and  strengthen  it,  where  it  is  very  weak. 

This  class  of  savings  banks  is  sometimes  a 
feature  of  societies,  and  sometimes  societies 
are  organized  for  the  purpose  of  saving  for 
some  specific  end,  ^     In  the  latter  class  the 

*  See  D.  W.  Bode  in  Arbeiterfreund  1892,  ''Die  Arbeiter- 
sparvereine  in  Konigreich  SacJiseii ;  "  and  Prof.  Dr.  Schaefer  in 
"  Sparhisse,'"  1893,  p.  302,  "  Mne  Untersuchung  uber  Arbeiter- 
sparvereine. " 


226  SAVINGS    INSTITUTIONS 

members,  recognizing  the  difficulty  they  have 
in  saving  for  the  larger  drafts  which  are 
periodically  made  upon  their  resources,  pro- 
vide for  them  in  this  way.  Thus  taxes  and 
rent  are  paid,  and  in  this  way  a  fund  is  laid 
by  for  Christmas  expenditures. 

The  periodical  payments,  which  are  peculiar 
to  co-operative  banks  and  building  associa- 
tions, constitute  a  powerful  incitement  to 
save,  and  the  scheme  is  nicely  adjusted  to  the 
wage  system.  The  weekly  or  monthly  pay- 
ment required  is  not  large  enough  to  consti- 
tute an  alarming  burden,  and  at  the  same  time 
the  penalty  for  delinquency  is  severe  enough 
to  induce  regularity  of  payment.  Thus  the 
shareholder  in  the  credit  association  is  more 
likely  to  form  habits  of  strict  regularity  in 
money  matters  than  the  depositor  in  ordinary 
savings  banks,  for  he  is  under  a  perpetual 
discipline  until  he  has  become  the  owner  of  a 
paid-up  share  of  stock. 

In  the  matter  of  lending  money  the  saving 
principle  is  also  conserved.     The  encourage- 


CO-OPERATIVE   SAVINGS   BANKS  227 

ment  of  borrowing  for  certain  purposes  might 
properly  be  called  the  second  degree  of  saving, 
or  the  intermediate  stage  between  the  begin- 
ning and  the  ultimate  purpose  of  saving.  Re- 
calling Prof.  Roscher's  characterization  of  the 
savings  bank,  as  ' '  the  elementary  school  of  cap- 
itahsm  "  ;  the  first  step  in  the  direction  of  capi- 
talism is  simple  saving ;  the  second  step  is  saving 
for  a  specific  purpose ;  and  the  end  is  the  entire 
ownership  and  direction  of  individual  wealth. 
Ordinary  savings  banks  only  concern  them- 
selves with  the  first  stage  in  this  ascending 
scale;  they  loan  money  entirely  under  the 
two  motives,  pecuniary  returns,  and  the  se- 
curity of  the  loans.  The  credit  association 
deals  with  a  class  whose  members  have 
schemes  for  the  acquisition  of  tangible  prop- 
erty or  for  the  improvement  of  their  property 
or  business. 

The  co-operative  movement,  which  began 
in  Germany  about  1850,  assumed  two  some- 
what distinct  phases.  One  branch,  which  was 
tunder   the   leadership    of    Herr    Schultze,    a 


228  SAVINGS    INSTITUTIONS 

native  of  Delitzsch,  developed  a  type  of  sav- 
ings and  loan  associations  which  came  to  be 
known  as  the  Schultze-Delitsch  system.  The 
other  division  was  under  the  leadership  of  Dr. 
Raiffeissen,  and  the  type  of  institution  result- 
ing from  it  became  known  as  the  Raiffeissen 
system. 

The  spirit  of  co-operation,  which  was  then 
rife,  gave  impetus  to  the  movement.  But 
the  motive  force  was  not  altogether  altruistic 
and  doctrinaire;  the  more  pressing  and  im- 
mediate selfish  interests  of  the  small  prop- 
ertied classes  came  to  its  aid.  Union  credit 
was  hailed  by  these  as  a  way  of  escape  from 
the  exactions  of  the  small  money  lenders, 
since  it  was  sought  through  a  union  of  credit 
to  acquire  strength  sufficient  to  tap  the  larger 
tills  at  more  moderate  rates.  Thus  two  ele- 
ments, quite  unlike  in  character,  united  to 
give  strength  and  impetus  to  the  enterprise. 

In  so  far  as  they  are  unions  of  borrowers, 
or  would-be  borrowers,  to  obtain  lower  interest 
rates,  they  have  no  conscious  interest  in  en- 


CO-OPERATIVE   SAVINGS   BANKS  229 

couraging  savings.  In  order  to  secure  the 
lower  rates  each  individual  member  is  pledged 
to  make  good  any  losses;  and  if  a  borrower 
fails  to  pay  back  his  loan  the  loss  must  be 
made  good,  either  out  of  the  dividends  which 
would  otherwise  go  to  the  members,  or  out  of 
the  pockets  of  the  members.  This  simply 
means  that  each  member  stands  pledged  to 
support  the  entire  credit  of  the  union. 

The  members  are  also  able  to  enforce  a  con- 
servative management  through  the  form  of 
organization.  The  governent  is  both  direct 
and  representative,  the  representatives  being 
chosen  on  the  principle  of  manhood  suffrage. 
The  governing  powers  are  vested,  first  in  the 
General  Assembly,  second  in  a  Supervising 
Council,  and,  third,  in  a  Board  of  Manage- 
ment. Provision  is  now  made  for  limited  lia- 
bihty  of  members,  where  it  is  desired,  but  the 
old  rule  is  still  generally  followed.  As  a  credit 
strengthener,  unlimited  hability  has  evident 
advantages  to  the  members.  It  induces  extra 
care  in  the  admission  of  new  members,  moral 


230  SAVINGS    INSTITUTIONS 

character  as  well  as  financial  ability  being 
taken  into  consideration.  It  also  induces  ex- 
traordinary vigilance  over  borrowing  members. 
They  are  apt  to  be  advised  by  their  co-mem- 
bers as  to  the  safe  conduct  of  their  business 
affairs,  and  to  be  admonished  against  any 
hazardous  or  speculative  ventures.  The  mem- 
bers, being  also  neighbors,  have  a  knowledge  of 
each  other's  affairs  and  a  personal  acquaintance 
which  makes  the  mutual  restraint  very  pow- 
erful. 

The  General  Assembly  consists  of  all  the 
members  when  called  together  to  dehberate 
and  legislate  in  the  interest  of  the  union. 
They  select  the  members  of  the  Supervising 
Council  and  the  members  of  the  Board  of 
Management,  they  prescribe  rules  for  their 
conduct,  stipulate  their  salaries,  and  depose 
them  for  cause.  They  regularly  hold  annual 
sessions  to  pass  upon  such  matters  as  the 
standing  of  accounts,  and  proposals  in  respect 
to  dividends.  They  hold  quarterly  sessions  to 
pass   upon  quarterly  reports  and  hear  com- 


CO-OPERATIVE   SAVINGS   BANKS  231 

plaints,  and  in  the  third  quarter  to  hold  the 
annual  election. 

The  Supervising  Council  is  a  body  usually 
containing  about  nine  members  chosen  by  the 
General  Assembly.  They  perform  the  offices 
usually  incumbent  upon  a  board  of  directors 
having  the  immediate  supervision  over  the 
acts  of  the  managers.  They  usually  hold 
weekly  meetings  at  which  the  members  of 
the  Board  of  Management  are  present  to  re- 
port progress  and  explain  any  questions  of 
policy.  They  are  of  course,  supposed  to  be 
picked  men,  especially  qualified  for  the  ser- 
vice; and  in  order  to  make  sure  of  always 
having  a  majority  of  experienced  members 
only  one- third  go  out  of  office  at  the  end  of 
each  year.  Before  the  accounts  are  sub- 
mitted to  the  General  Assembly  they  must 
have  been  examined  and  passed  upon  by  the 
Council. 

The  Board  of  Managers  usually  consists  of 
three  members,  the  director,  the  cashier,  and 
the   comptroller,   who  are  charged  with  the 


232  SAVINGS    INSTITUTIONS 

conduct  of  all  the  administrative  and  clerical 
work  and  the  rendering  of  reports  of  the 
standing  of  the  hank  to  the  Council,  to  the 
Assembly  and  to  the  public  authorities. 

The  capital  is  derived  from  three  sources, 
from  loans  from  banks  and  private  capitalists, 
from  the  sales  of  stock,  and  from  savings  de- 
posits. The  main  resource  must  be  the  sale 
of  shares  to  members,  and  the  amount  of 
these  shares  is  determined  by  the  average 
ability  of  the  community  to  pay.  If  the  ex- 
pected patrons  are  well-to-do  the  shares  will 
be  in  correspondingly  high  denominations, 
while  in  poor  communities  the  value  of  a  share 
is  frequently  fixed  as  low  as  one  hundred 
marks.  This  flexible  quality  is  one  of  the 
highest  merits  of  the  institution,  because  it 
can  be  made  to  fit  almost  any  conditions.  To 
understand  this  we  must  remember  that  the 
shares  of  stock  are  not  expected  to  be  pur- 
chased outright.  The  member  may  purchase 
his  share  outright  if  he  chooses,  but  the  usual 
plan  is  to  pay  first  a  common  membership  fee, 


CO-OPERATIVE   SAVINGS   BANKS  233 

and  then  pay  a  fixed  sum  each  week,  or  each 
month,  thereafter,  until  the  share  is  paid  up, 
after  the  manner  of  building  and  loan  associa- 
tions in  the  United  States.  The  amount  of 
the  shares  and  the  conditions  of  payment  are 
determined  by  the  different  societies.  In 
some  the  monthly  payments  are  as  low  as 
twelve  cents.  The  natural  order  of  growth, 
according  to  Mr.  A.  Egmont  Hake,  is  to  begin 
with  small  shares  and  to  increase  them  from 
time  to  time  as  the  institution  bears  fruits  in 
saving  power.  ^  Mr.  Edward  T.  Peters  cites, 
in  illustration  of  this  tendency,  the  case  of 
the  pioneer  bank  at  Delitzsch,  the  home  of  the 
founder  of  the  system,  where  the  shares  were 
originally  fixed  at  thirty  marks  and  were  suc- 
cessively raised  to  forty-eight,  sixty,  ninety, 
one  hundred  and  twenty,  and  three  hundred 
marks.  It  is  also  noted  by  Mr.  Peters  that 
the  value  of  shares  is  sometimes  as  high  as 
6,000  marks,   and  that  the  general  average 

^Article:    People's  Banks,  iu  Journal  of  the  Institute  of 
Bankers,  June,  1899. 


234  SAVINGS    INSTITUTIONS 

has  a  decided  upward  tendency.     In  1884,  it 
was  235,  as  against  206  in  1876.  ^ 

The  pohcies  of  the  two  systems  of  co-opera- 
tive banking  in  Germany  differ  in  the  treat- 
ment of  their  respective  patrons.  The  Schulze- 
Dehtzsch  scheme  is  more  concerned  with  the 
immediate  encouragement  of  saving;  loans 
are  placed  with  a  view  to  the  profit  of  the 
union,  rather  than  to  the  advantage  of  the 
members  who  borrow  money,  and  large  divi- 
dends constitute  the  objective  point.  To  that 
end  they  are  generally  organized  under  the 
plan  of  unlimited  liability  of  stockholders, 
that  they  may  be  able  to  secure  loans  on  more 
favorable  terms.  To  that  end  also  the  mem- 
bership is  confined  to  no  single  class,  but  rich 
and  poor,  and  persons  of  all  professions  and 
employments  are  encouraged  to  become  mem- 
bers, the  object  being  to  minimize  the  chances 


^  3Ir.  E.  L.  Peter's  essay  on  Co-operative  Credit  Associations 
in  certain  European  countries,  and  tlieir  Relation  to  Agricul- 
tural Interests,  published  in  the  U.  S.  Department  of  Agricul- 
ture, Division  of  Statistics,  Miscellaneous  Series,  No.  3,  in 
1892,  contains  about  the  best  account  of  these  institutions 
published  in  English. 


CO-OPERATIVE   SAVINGS   BANKS  235 

of  a  general  run  upon  the  bank  on  account  of 
business  failures.  And  this  spirit  is  further 
shown  in  the  policy  of  placing  loans  with  a 
view  to  the  greatest  advantage  and  security, 
and  under  no  restrictions  save  the  provision 
that  none  but  members  may  borrow.  Hence 
all  sorts  of  securities  are  accepted  —  mort- 
gages, pledges,  securities,  bills.  ^ 

The  Raiffeissen  banks  claim  to  be  more 
ethical  in  their  spirit,  and  not  to  regard  earn- 
ings so  much  as  the  general  well  being  of  the 
members.  Membership  is  limited  to  persons 
engaged  in  agriculture,  with  a  view  to  securing 
a  mutuality  of  interest  and  sympathy.  The 
loans  also  must  be  made  for  a  specific  purpose 
approved  by  the  directory.  ^ 

1  The  same  spirit  is  shown  in  the  policy  of  short-time  loans, 
with  a  view  to  keeping  the  debts  well  within  call  in  case  of 
emergency,  or  in  case  it  should  appear  that  the  borrower  was 
using  his  means  unwisely  and  in  a  way  likely  to  jeopardize 
his  solvency.  Thus  business  expediency  exercises  a  whole- 
some discipline  over  the  borrower's  stewardship,  and  makes  it 
to  his  interest  to  be  vigilant  and  careful  in  the  management  of 
his  affairs. 

2  Fuller  accounts  of  the  working  methods,  and  results  of 
these  two  systems  of  co-perative  banking  may  be  found    in 


236  SAVINGS    INSTITUTIONS 

One  means  sought  by  the  Belgian  state  to 
supply  the  needs  of  the  small  farmers  has 
been  the  establishment  of  a  system  of  com- 
ptoirs  agricoles  in  each  district — with  author- 
ity to  loan  the  funds  of  the  National  Savings 
Bank  to  peasant  proprietors.  The  peasantry 
are  said  to  have  been  shy  of  dealing  with  the 
strange  agents,  and  the  scheme  met  with  small 
success. 

In  Belgium,  co-operative  banking  is  notable 
rather  for  what  has  been  undertaken  than  for 
what  has  been  achieved.  The  latest  develop- 
ment is  an  adaptation  of  the  Raiffeissen  sys- 
tem of  Agricultural  Credit  Associations,  to 
meet  the  needs  of  the  small  farmers.  The 
plan  consists  in  the  virtual  abandonment  of 
the  saving  feature — leaving  that  to  the  state, 
and  COD  fining  the  operations  to  the  procuring 
of  credit  for  members.  This  calls  for  the  co- 
operation of  the  National  Savings  Bank — the 

Chapters  VI  and  VII  of  People's  Banks  by  Henry  W.  Wolff  ; 
in  Lexis's,  "  Ilandwarterbuch  der  SttuitswusenscJiaften,"  Vol.  II, 
Article:  Darlehnakassenvereine,  !Marcliet;  also  Vol.  IV  Art. 
Kreditgenosaenachaften."    Crftger. 


CO-OPERATIVE    SAVINGS   BANKS  237 

recognized  custodian  of  the  people's  savings, 
and  this  co-operation  is  provided  for  in  a  law 
of  1894  authorizing  the  directory  to  loan 
money  to  the  agricultural  banks.  Indeed  the 
National  Savings  Bank  has  become  an  active 
propagandist  for  the  organization  of  agricul- 
tural banks  of  the  modified  Kaiffeissen  type. 
But  no  remarkable  results  have  been  achieved 
by  this  effort.  ^ 

The  better-conditioned  classes  have  been 
more  successful  in  forming  mutual  credit  asso- 
ciations. The  Unions  du  Credit  are  a  type 
designed  by  M.  Haeck,  who  organized  the  first 
society  in  1848.  They  are  also  exclusive  in 
character,  great  care  being  exercised  in  admit- 
ting to  membership  only  persons  of  probity 
and  financial  standing.  The  working  plan  is 
for  each  member  to  subscribe  for  one  share  of 
200  francs — on  which  they  pay  sometimes  20 

*  They  seem  to  be  steadly  growing,  however,  the  number 
of  such  associations  having  increased  from  77  in  1896  to  165 
in  1897,  and  to  204  in  1896.  And  in  tlie  first  named  year,  loans 
were  made  amounting  to  4,470,000  francs.  See  Consular  Re- 
port for  October,  1898. 


238  SAVINGS    INSTITUTIONS 

francs  and  sometimes  only  10  francs  down. 
A  share  of  stock  entitles  a  member  to  a  credit 
of  2,000  francs,  and  the  Union  guarantees  the 
member's  credit  for  that  amount.  The  real 
protection  to  the  Union  consists  in  the  care 
with  which  it  selects  its  members.  Of  course 
in  addition  it  may  hold  defaulting  members 
liable  in  so  far  as  they  are  able  to  pay. 

It  was  to  meet  the  needs  of  a  humbler  class 
that  the  system  of  Banques  Populaires  was 
started  in  1863,  under  the  leadership  of  M. 
Leon  d'  Andrimont,  a  convert  to  the  Schulze- 
Delitzsch  system  as  it  is  in  Germany.  The 
idea  was  to  reach  the  small  tradesman,  the 
small  farmer  and  members  of  the  artisan 
class,  but  the  purpose  has  been  realized  only 
in  a  small  degree.  Nevertheless  their  course 
has  been  marked  by  business-like  and  con- 
servative methods,  and  the  dividends  have 
generally  ranged  between  four  and  six  per 
cent.  Very  extraordinary  success  in  the  mat- 
ter of  earningsls  noted  in  a  few  cases,  as  in 
the   case   of  the   Bank   of  Ghent,  which   de- 


CO-OPERATIVE   SAVINGS   BANKS  239 

clared  a  dividend  of  eight  per  cent  in  1895, 
and,  in  the  case  of  the  Bank  of  Jumet,  which 
declared  a  dividend  of  fifteen  per  cent.  They 
have  generally  discarded  the  principle  of  un- 
hmited  liability  of  members,  and  instead 
have  adopted  the  principle  of  liability  in  some 
multiple  sum  of  the  nominal  value  of  the 
share,  usually  for  five  times  the  face  value. 
And  they  have  also  discarded  the  principle  of 
limiting  each  member  to  a  single  share.  The 
shares  are  usually  in  denominations  of  two 
hundred  francs,  are  paid  up  at  the  rate  of  fifty 
centimes  a  week,  or  of  two  francs  a  month, 
and  new  members  usually  pay  a  membership 
fee  of  three  francs  and  fifty  centimes  for  a 
pass-book.  ^ 

In  spite  of  their  success  in  a  business  way, 
they  are  not  in  any  wide  sense  what  their 
name  implies — People's  Banks.  They  are 
even  apt  to  become  Capitalists'  Banks.  Mr. 
Wolff  in  speaking  of  the  Verviers  Bank  de- 

1  Extraordinary  economy  is  observed  in  the  administration. 
The  labor  is  mostly  unremunerated — only  the  director  and  the 
ashier  are  paid  for  their  services. 


240  SAVINGS    INSTITUTIONS 

scribes  it  as  "  thoroughly  popular  and  demo- 
cratic". 

"There  are,  it  is  true,"  he  says,  "among 
its  3,000  members  449  '■rentiers''',  but  most 
of  these  are,  I  believe,  small  men,  retired 
from  the  work  of  business.  There  are  446 
small  manufacutrers,  188  counting-house 
clerks,  117  small  cultivators,  76  teachers,  2 
priests,  and  2  sacristans.  All  the  rest  may  be 
described  as  working  men  and  women, ' ' 

The  bank  which  did  the  largest  business, 
the  People's  Bank  of  Ghent,  on  the  other 
hand,  is  described  as  "  thoroughly  capitalis- 
tic ".  It  retains  the  German  principle  of  un- 
limited liability  of  members — which  perhaps 
has  made  it  more  choice  in  the  selection  of  its 
members.  That  the  members  are  not  largely 
of  the  working  class  is  shown  by  the  state- 
ment of  the  director  that  of  the  1,500  mem- 
bers, 1,000  have  been  examined  as  to  their 
financial  condition  by  the  Central  office  of  the 
National  Savings  Bank  at  Brussels,  and  they 
had  been  reported  ' '  perfectly  capable  of  an- 
swering at  any  time  for  the  amount  of  their 
liability  pledged,  say  5,000,000  francs.  "^ 

^  Wolir's  People's  Banks. 


CO-OPERATIVE   SAVINGS   BANKS  241 

As  a  complete  scheme— the  different  phases 
of  saving  and  spending  culture  in  Belgium 
presents  a  fine  mechanism.  The  state  assumes 
the  function  for  which  private  initiative  seems 
inadequate,  the  collection  and  custody  of  the 
deposits,  and  while  teaching  the  people  to 
save  it  is  not  unmindful  of  the  need  of  a 
proper  care  for  their  expenditures.  It  has 
provided  safe  investments  in  the  form  of  state 
bonds,  pensions  and  insurance  for  those  who 
need  a  large  amount  of  direction  in  the  mat- 
ter of  their  investment  in  forms  of  capital. 
And  the  state  leaves  the  budding  capitalist 
class  to  increase  their  credit  by  acting  co-opera- 
tively— its  own  part  being  to  make  the  general 
saving  fund  available  to  co-operative  organiza- 
tions when  they  conform  to  a  certain  standard 
of  conservative  methods. 

The  growth  of  co-operative  savings  banks 
in  Italy  under  the  title — "  People's  Banks  "  is 
one  of  the  numerous  evidences  of  co-operative 
tendencies  in  that  country.  They  are  the 
fruits  of  the  active  propaganda  of  M.  Luigi 


242  SAVINGS   INSTITUTIONS 

Luzatti,  formerly  Minister   of   Finance,  who 
was  inspired  by  the  Schulze-Delitzsch  scheme, 
of  which  they  are  in  fact  an  adaptation.     The 
368,199  patrons  of  these  banks  in  1893  were 
divided  according  to  occupation   as   follows 
Large  farmers  24,116,  small  farmers  88,803 
peasants    17,165;    small    merchants    92,963 
mechanics  29,864;  employees  69,823. 

These  banks  were  first  established  in  Italy 
in  1864,  but  reliable  statistics  begin  in  1870, 
when  there  were  fifty  of  them.  In  1881 
there  were  171;  and  in  1887  there  were  608 
with  a  capital  of  104,000,000  francs.  The 
severe  commercial  crisis  which  began  in  1887 
only  retarded  the  increase ;  it  did  not  stop  it. 
In  1888  there  were  652;  in  1889,  there  were 
672;  and  in  1890  there  were  694.  During 
1891  there  was  no  increase.  The  growth  be- 
gan again  the  next  year  and  at  the  close  of 
1894  there  were  720  banks  with  115,000,000 
francs  capital,  and  372,000,000  francs  on  de- 
posit. ^ 

1  See  Article  by  Prof.  Giuseppe  Fiamingo  iu  Le  Siecle, 
Paris,  November  18,  189"). 


CO-OPERATIVE   SAVINGS   BANKS  243 

While  they  are  inspired  by  the  Schulze- 
Delitzsch  system  they  are  modified  in  impor- 
tant details  and  adjusted  to  the  conditions 
obtaining  in  Italy,  and  M.  Luzatti  was  excel- 
lently qualified  to  understand  the  conditions 
to  which  they  were  made  to  fit, ' 

An  important  modification  of  the  original 
plan  was  in  the  denominations  of  the  shares, 
since  the  minimum  share  plan  in  use  in  Ger- 
many is  not  adapted  to  the  small  capitals  of 
Italy.  The  shares  were  accordingly  reduced 
in  nominal  value  to  25  and  50  hre.  ^  While 
this  is  calculated  to  admit  persons  of  very  small 
income,  the  complementary  modification,  viz : 
the  abolition  of  the  rule  restricting  each 
member  to  one  share,  affords  an  opportunity 
for  the  better  conditioned  classes  to  invest  in 
stock  according  to  their  means.  One  person 
may  own  one  share  in  an  association  or 
several.  ^ 


^  The  Italian  name  for  them  is  Banehe  Popolari. 
^  The  first  amount  represents  less  than  five  dollars  in  United 
.States  money. 

'  They  have  been  given  more  of  a  banking  character  by  do- 


244  SAVINGS    INSTITUTIONS 

To  carry  out  its  policy,  it  is  essential  for  a 
bank  to  cultivate  a  standing  in  a  larger  com- 
mercial community,  and  especially  to  have 
credit  with  the  commercial  banks.  The  most 
essential  means  to  this  end  consists  in  the 
minimizing  of  losses  resulting  from  the  insolv- 
ency of  members.  Hence  it  becomes  an  ob- 
ject to  be  discriminating  in  admitting  persons 
to  membership ;  the  doubtful  class  is  apt  to  be 
excluded,  and  the  class  which  ranks  as  ' '  bad  ' ' 
is  sure  to  be.  The  most  delicate  part  of  the 
banking  business  is  to  find  the  right  kind  of 
customers  to  whom  to  loan  money.  Upon 
their  success  in  this  depends  the  keeping  down 
of  the  column  of  losses.  Therefore,  the 
"  coining  of  honesty  "  on  the  part  of  the  co- 
operative banks  is  likewise  a  coin  of  vantage 
to  the  commercial  banks,  and  doubtless  has 
helped  to  cultivate  the  idea  that  there  is  no 
necessary    antagonism    between    institutions 

ing  a  discounting  business,  like  ordinary  commercial  banks, 
and  they  are  also  prepared  to  discount  their  outstanding 
paper  and  realize  on  the  protit  of  such  a  business. 


CO-OPERATIVE   SAVINGS   BANKS  245 

built  upon  the  commercial  basis  and  those 
built  upon  the  saving  principle. 

Another  interesting  form  of  savings  insti- 
tution is  the  "  Casse  Rurali  ",  which  is  an 
adaptation  of  the  Raiffeisen  Loan  Banks  made 
by  Dr.  Wollemborg  in  1883.  These  came  in 
response  to  the  distress  of  the  usury-ridden 
small  farmer,  and  they,  like  their  German 
prototype,  are  much  more  loan  than  savings 
institutions.  In  furtherance  of  the  purpose 
of  placing  loans  at  the  disposition  of  small 
farmers  at  a  reasonable  rate  of  interest,  the 
public  savings  banks  advance  them  money 
according  to  the  practice,  just  noted,  in  Bel- 
gium. They  have  been  so  successful  in  their 
operation  that  no  losses  have  resulted  from 
such  advances.  ^ 

These  farmers'  banks  are  to  an  exceptional 
degree  neighborhood  affairs,  their  fortnightly 

^  The  limitation  of  the  liability  of  share  holders  is  a  further 
modification  required  by  conditions  in  Italy.  In  Italy  where 
both  the  business  and  the  social  spirit  are  more  mercurial  and 
where  the  mutual  confidence  found  among  the  Germans  does 
not  exist,  such  a  provision  is  evidently  expedient. 


246  SA.VINGS  INSTITUTIONS 

meetings  constituting  one  of  the  events  of  the 
village  community  life.  The  individual  mem- 
bers also  participate  in  the  proceedings  of  the 
meetings  and,  it  is  said,  manifest  a  livelier 
concern  in  the  affairs  of  the  bank  than  is  seen 
in  Germany ;  this  privilege  is  said  to  greatly 
intensify  their  moral  and  educational  influence 
in  the  community.  Membership,  however,  is 
not  open  to  the  public,  but  candidates  must 
stand  for  election.  To  secure  this  prize,  it 
requires  a  reputation  in  the  neighborhood  for 
sobriety,  honesty,  and  industry.  It  requires 
also  an  ability  to  read  and  write,  and  this  re- 
quirement is  said  to  have  materially  diminished 
illiteracy  in  some  localities. 

The  organization  is  designed  both  to  protect 
the  bank  against  losses  and  to  protect  the 
borrowers  against  their  own  thriftlessness. 
To  this  end  the  loans  are  of  short  duration,  usu- 
ally about  three  months ;  the  frequent  renewals 
being  designed  to  remind  borrowers  of  the 
need  of  keeping  a  clean  record  with  the  bank.  ^ 

^  Tlic  loans  are  also  small  in  amount,  the  Council  being 
usually  limited  in  its  authority  to  let  individual  loans  to  from 
300  to  GOO  lire. 


CO-OPERATIVE   SAVINGS   BANKS  247 

The  village  bank  is  apt  to  be  quasi  public  in 
its  character.  The  mayor  of  the  village  is 
usually  a  patron,  and  the  village  corporation 
itself  may  be  among  the  depositors.  The  vil- 
lage cure  generally  takes  an  active  interest  in 
it,  and  on  some  occasion  he  opens  the  church 
for  the  fortnightly  meetings.  Mr.  Wolff 
draws  the  following  very  sympathetic  picture 
of  their  workings: 

"  Members  do  not  come  merely  to  bring 
their  savings ;  they  want  to  hear  something  of 
what  is  going  on.  They  are  entitled  to  see  the 
balance-sheet,  which  is  drawn  up  every  fort- 
night at  the  close  of  the  common  meeting, 
and  hung  up  in  the  public  room  of  the 
municipio.  After  the  receipt  of  the  savings 
comes  the  consideration  of  applications  for 
loans.  As  a  rule,  there  is  the  vacca,  or  the 
vitella,  or  the  maile,  to  be  bought — though 
the  pig  is  not  yet  as  much  honored  in  Italy  as 
he  deserves  to  be.  Sometimes  in  the  place  of 
a  cow  or  a  calf,  there  will  be  a  goat.  Or  else 
the  village  wheelwright  will  want  to  buy 
wood,  the  shoemaker  leather,  and  so  on. 
Every  case  meets  with  careful  consideration. 
Is  the  applicant  trustworthy?  Is  his  case 
good  ?  Is  the  sum  a  legitimate  one  ?  Is  the 
time  proposed  for  repayment  excessive  ?  Are 
the  sureties  good  ?  It  may  happen  that  the 
loan  is   refused,  though   such   cases   are  not 


248  SAVINGS    INSTITUTIONS 

many.  It  may  happen  that  the  account  is  re- 
duced or  the  period  curtailed.  According  as 
the  committee  decide,  the  apphcant  is  advised, 
and  then  he  may  come  with  his  sureties  to  re- 
ceive the  money  from  the  cashier  in  exchange 
for  a  bill  of  exchange. ' '  ^ 

The  church  in  Italy  is  to  an  unusual  degree 
concerned  with  the  industrial  weal  of  the 
communicants;  and  the  parish  priest  is  inter- 
ested in  all  good  works  for  improving  the  con- 
dition of  the  people.  He  is  always  one  of  the 
*'  influential  persons  "  whom  it  is  well  to  enlist 
in  the  service  of  a  meliorative  movement  at 
its  beginning. 

Latterly  the  Wollemborg  scheme  has  been 
engrafted  on  the  body  of  the  church  itself. 
The  great  motive  power  of  religion  was 
brought  to  bear  upon  the  savings  movement 
through  the  agitation  of  Don  Cerutti,  the  par- 
ish priest  of  Gambarare,  in  Venetia.  The 
meetings  are  opened  and  closed  with  a  brief 
ritualistic  service,  and  the  rules  prescribe  that 

1  Of  tlic'se  institutions  Mr.  Wolll"  rri)()rts  that  eighty  of  the 
Ijanks  organized  under  the  Wolleiuhorg  i)i-oi)agun(hi  were  in 
operation  in  1895,  with  about  four  hundred  others  of  inilepend- 
'Cnt  organization. 


CO-OPERATIVE   SAVINGS   BANKS  249 

a  new  member  must  "  not  be  notoriously  op- 
posed to  the  Catholic  Church  and  the  existing 
government".  It  is  also  provided  that  in 
event  of  the  dissolution  of  a  bank  the  ac- 
cumulated reserve  shall  be  appUed  to  some 
Catholic  work.  ^  This  phase  promises  a  most 
vigorous  growth  in  provinces  whre  the  church 
power  is  strongest.  And  in  this  regard  the 
church  and  state  agencies  admirably  supple- 
ment one  another,  for  there  exists  in  some 
quarters,  on  the  part  of  church  people,  a  cer- 
tain bitterness  toward  the  state  which  might 
militate  against  the  success  of  an  institution 
immediately  championed  by  it. 

On  the  other  hand  the  efforts  of  the  church 
are  well  adapted  to  supplement  the  efforts  of 
voluntary  co-operation  as  a  secular  movement. 
There  is  a  class  of  intensely  religious  persons 
which  finds  its  cultural  inspiration  more  ex- 
clusively in  the   church.      Its   members   are 

*  The  first  of  these  banks  was  established  in  1890  and  in  six 
years  there  were  about  four  hundred  in  different  parts  of  the 
kingdom. 


250  SAVINGS    INSTITUTIONS 

very  dependent  upon  the  religious  influence 
and  priestly  counsel  in  all  things  where  direc- 
tion and  counsel  are  required,  and  they  are 
not  so  likely  to  enter  into  voluntary  co-opera- 
tion outside  the  church. 

In  Russia,  the  Schultze-Delitzsch  plan  was 
brought  to  the  rehef  of  the  peasant  farmers. 
It  served  there  as  a  loan  bank  rather  than  a 
savings  bank,  although  the  most  successful 
banks  have  been  those  which  have  relied  upon 
upon  their  own  resources.  The  transition 
from  serfdom  to  peasant  proprietorship  has 
been  attended  by  great  severities.  The  new 
proprietors  have  been  deficient  in  managing 
skill,  and  they  have  needed  protection  and  aid 
in  securing  credit  both  to  pay  off  the  incum- 
brances on  the  land  and  for  the  purchase  of 
working  tools  and  improvement.  ^ 

There  are  a  number  of  reasons  why  the  co- 
operative savings  bank,  as  a  distinct  institu- 

^  See  "  The  Artels  and  the  Co-operative  Movement  in  Rus- 
sia" by  W.  Louguinine;  also  "A  history  of  Banking  in  the 
Russian  Empire  "by  Antoine  E.  Him  in  "A  History  of 
Banking  in  All  Nations  ". 


CO-OPERATIVE   SAVINGS   BANKS  251 

tion,  does  not  promise  any  large  amount  of 
usefulness  in  America.  The  Schultze-Delitzsch 
scheme  does  not  seem  to  fit  into  our  conditions 
in  the  way  it  does  into  the  conditions  in  con- 
tinental Europe  because  of  the  absence  here 
of  the  very  small  tradesmen  class.  Our  in- 
dustries do  not  so  much  shade  down  into  the 
httle  room  with  a  handful  of  goods,  and  a 
custom  not  sufficient  to  employ  the  time  of 
one  person,  but  which  with  the  aid  of  an 
alarm  bell  announcing  each  arrival,  can  be 
served  by  the  wife  or  daughter  of  the  house 
without  interfering  with  the  household  duties. 
Our  merchants  do  business  on  a  larger  scale. 
They  usually  occupy  a  large  room,  in  which 
is  stored  a  large  stock  and  in  which  are  em- 
ployed a  number  of  clerks.  Consequently, 
they  have  credit  with  the  regular  commercial 
banks  and  they  find  it  to  their  interest  to  de- 
posit their  daily  receipts  with  them.  Except 
in  some  of  the  larger  cities,  like  New  York 
and  Philadelphia,  where  the  recently  arrived 
immigrants  have  reproduced  to  some  extent 


252  SAVINGS    INSTITUTIONS 

the  small  trading  types  of  their  home  coun- 
tries, the  independent  business  classes  would 
not  find  it  to  their  advantage  to  become  mem- 
bers of  a  co-operative  bank.  They  might  hold 
stock  in  the  co-operative  bank  to  some  extent, 
as  a  business  expedient,  and,  together  with 
members  of  the  employee  classes,  they  might 
utilize  it  in  the  purchase  of  homes.  ^ 

Rural  banks  are  scarcely  more  in  demand 
than  the  other  type,  for  the  reason  that  our 
farms  are  larger.  The  average  farm  in  America 
supplies  the  owner  with  all  the  credit  that  he 
ought  to  have,  and  if  he  has  exhausted  that 
he  should  not  be  eligible  to  membership  in  a 
well  regulated  co-operative  bank.  In  the  first 
place  he  enjoys  a  personal  credit,  so  long  as 
his  land  is  unencumbered,  which  enables  him 
to  draw  upon  the  commercial  bank  for  capital 
to  increase  his  stock,  etc.  If  it  is  desired  to 
purchase  a  farm,  paying  a  part  down  and  a 
part  on  time,  he  can  secure  as  favorable  a  rate 

',In  this  respect  tlie  building  associations  serve  the  purpose 
well  enough. 


CO-OPERATIVE   SAVINGS   BANKS  253 

of  interest  in  the  general  money  market  as  he 
could  through  a  co-operative  credit  association. 

But  there  are  two  ways  in  which  the  co-oper- 
ative savings  idea  may  be  employed.  One  is  as 
an  adjunct  to  some  phase  of  co-operative  in- 
dustry. Co-operative  distribution,  especially, 
offers  facihty  for  such  development.  The  sav- 
ings funds  might  supply  a  part  of  the  capital 
for  the  purchase  of  stock,  and  it  might  also 
furnish  a  convenient  receptacle  for  the  deposit 
of  dividends.  If  the  principle  of  charging 
all  alike  full  market  prices  and  distributing 
the  profits  among  members  according  to  the 
respective  amounts  of  their  purchase  is  fol- 
lowed, the  savings  bank  would  tend  to  make 
the  gain  to  members  more  than  ever  ' '  so 
much  saved  ".  Instead  of  extending  the  pur- 
chasing habits  according  to  the  increase  of  the 
purchasing  power  of  their  wages  the  members 
might  tend  to  capitalize  the  difference  if  it 
were  regularly  credited  to  the  savings  account 
on  dividend  day. 

The  other  way  is  co-operative  more  in  name 


254  SAVINGS    INSTITUTIONS 

than  in  fact.  It  contemplates  the  use  of  the 
machinery  of  co-operative  credit  and  savings 
for  the  carrying  out  of  a  great  philanthropic 
scheme  which  has  behind  it  a  higher  skill  and 
organization.  The  point  is  best  illustrated  by 
the  present  project  of  the  Salvation  Army  to 
biing  the  surplus  labor  in  the  ranks  of  the  un- 
employed into  potential  relationsliip  with  the 
instruments  of  production.  The  scheme  in 
brief  is,  first,  to  secure  the  loan  of  sufficient 
capital  to  be  used  in  the  purchase  of  land  and 
tools;  second,  to  divide  the  land  up  into  a 
number  of  very  small  tracts,  each  tract  being 
designed  to  support  a  family,  or  something 
more,  if  used  for  market  gardening;  and 
third,  to  locate  persons  who  are  out  of  em- 
ployment upon  these  tracts  and  put  them  in 
the  way  of  owning  a  clear  title  to  a  little 
home  and  farm.  The  first  attempts  at  inde- 
pendent industry  are  supplemented  by  in- 
struction m  the  arts  of  agriculture.  The  ques- 
tion of  marketing  the  crops  is  simplified  by 
representatives  of  the  army  acting  as  agents 


CO-OPERATIVE   SAVINGS   BANKS  255 

for  the  entire  colony,  and  greatly  to  the  ad- 
vantage of  the  colonists;  supplies  are  pro- 
cured on  the  same  coUectivistic  plan.  These 
utilities  are  not  forced  upon  the  colonists,  but 
the  advantages  are  so  evident  that  there  is  no 
trouble  on  that  score.  Thus  the  colonist  is 
provided  with  economies  and  helps  by  which 
he  may  realize  to  the  utmost  on  his  little 
farm.  A  modification  of  the  Raiffeisen  rural 
bank  offers  the  means.  He  makes  his  pay- 
ments as  he  markets  his  crops,  and  after  he 
has  become  a  full  proprietor  he  finds  himself 
a  regular  patron  of  the  savings  bank,  and  his 
saving  then  goes  to  enlarge  the  sphere  of  the 
colony's  usefulness.  ^ 

1  This  most  interesting  phase  of  the  Salvation  Army  work 
is  given  as  it  was  described  to  the  author  by  Col.  R.  E.  Holz, 
who  is  at  the  head  of  its  social  work. 


CHAPTER  VIII 

MUNICIPAL    SAVINGS    BANKS 

The  municipal  savings  banks  properly  be- 
long to  a  strong  class  of  municipalities.  They 
can  only  thrive  in  places  where  the  local  spirit 
is  strong,  where  the  local  government  is  pure, 
and  where  the  local  officials  are  accustomed  to 
wield  a  large  measure  of  authority.  Accord- 
ingly, they  have  come  into  being  and  have 
met  with  success  in  those  countries  where  the 
early  history  of  the  town  made  a  large  meas- 
ure of  local  autonomy  a  necessity.  Towns  of 
this  class  possess  the  public  spirit  and  the  in- 
telligent administration  required  for  the  suc- 
cess of  such  a  public  venture.  They  also  pos- 
sess a  fund  of  gratuitous  pubUc  service  among 
the  citizens  which  may  be  drawn  upon  when 
occasion  requires.  ^ 

'  For  a  fuller  discussion  of  the  kind  of  municipalities  that 
are  qualified   for  such  undertakings  see  an  article  by  the 
author  entitled  "  A  neglected  principle  in  civic  reform"  pub- 
lished in  the  Journal  of  Sociology  for  May,  1900. 
(256) 


MUNICIPAL   SAVINGS   BANKS  257 

This  kind  of  municipal  activity  is  offensive 
to  a  certain  class  of  extreme  individualists, 
and  it  grates  sufficiently  upon  the  average  per- 
son to  require  a  doctrinal  justification  for  its 
existence.  This  is  found  in  popular  education. 
Education  is  generally  ascribed  to  the  local 
rather  than  to  the  central  government.  And 
when  public  culture  is  attempted  on  a  more 
extensive  scale,  as  in  the  dissemination  of 
art,  in  paintings,  sculpture,  music  (as  in  the 
opera  and  concert),  and  in  the  drama,  it  is 
generally  assigned  also  to  the  municipahty. 
In  fact,  these  improving  institutions,  when 
managed  as  functions  of  the  city,  are  also 
defended  on  the  ground  of  being  a  part  of  the 
general  scheme  of  pubhc  education.  Just  so, 
the  savings  bank  would  seem  to  fit  in  with  the 
general  scheme  of  municipal  activities  better 
than  in  any  other  place. 

As  culture  institutions  any  of  these  are 
safer  in  the  hands  of  the  town  govern- 
ment than  in  private  hands.  This  does  not 
mean  that  private  institutions  may  not  exist 


258  SAVINGS    INSTITUTIONS 

at  the  same  time  any  more  than  the  argu- 
ments in  favor  of  a  pubHc  school  system 
would  mean  a  monopoly  of  all  the  elementary 
education.  But  public  savings  banks,  like 
the  public  schools  and  other  cultural  institu- 
tions, tend  less  than  private  institutions  to  be 
diverted  from  the  spirit  of  a  diffusive  culture. 
For  example,  the  private  school  will  cater  to 
a  certain  class,  and  a  private  theatre  will  sacri- 
fice the  ethical  and  cultural  spirit  in  the  inter- 
est of  box-office  receipts.  Likewise,  the  pri- 
vate savings  bank  is  of  uncertain  utility, 
there  being  no  positive  assurance  that  it  will 
not  be  deflected  from  its  original  purpose  and 
cater  to  the  capitalist  classes. 

But  these  schemes  of  attractive  culture  are 
practicable  only  in  municipalities  that  have  a 
strong  historic  sentiment,  because  without 
this,  they  are  likely  to  lack  the  spirit  of  ex- 
tensive culture.  In  a  new  country,  under 
the  democratic  influence,  the  towns  generally 
have  excellent  systems  of  public  schools,  pro- 
viding the  rudimentary  grounding  essential  to 


MUNICIPAL   SAVINGS   BANKS  259 

an  equipment  for  an  industrial  career ;  but  be- 
yond this  simple,  utilitarian  programme,  they 
do  not  go.  Culture  in  art  is  likely  to  be  un- 
dervalued, and  the  people  have  not  long  been 
famihar  with  under-class  problems.  A  his- 
toric town,  on  the  other  hand,  prefers  to 
develop  attractive  forms  of  popular  culture 
and  to  bring  them  to  a  high  degree  of  efficiency 
to  working  out  the  highest  type  of  a  public 
school  system.  The  utihtarian  element  is 
less  dominant  and  local  pride  demands  the 
more  conspicuous  forms  of  culture. 

These  culture  schemes  do  not  harmonize 
with  the  American  idea  of  municipal  func- 
tions because  of  small  confidence  in  the  intel- 
ligence and  integrity  of  our  municipal  govern- 
ments ;  a  cause  of  much  of  our  conservatism 
in  regard  to  the  extension  of  city  government. 
This  is  a  fatal  objection  to  the  adoption  of  the 
principle  of  municipal  savings  banks  in  this 
country. 

The  historic  predecessor  of  municipal  sav- 
ings   banks    was   the    municipal    pawnshop. 


260  SAVINGS    INSTITUTIONS 

While  the  pawnshop  is  designed  to  protect  the 
necessitous  poor  against  the  extortions  of  usur- 
ers, and  is  not  in  any  sense  an  educational  in- 
stitution, its  object  may  be  furthered  by  a 
union  with  the  educational  bank,  the  city  se- 
curing the  money  to  advance  on  the  small 
pawn  from  the  deposits.  And  on  the  other 
hand,  the  pawnshop  might  serve  to  render  the 
savings  bank  more  attractive  in  the  higher 
interest  rate  afforded.  It  is  not  desirable  that 
the  interest  charged  on  small  loans  be  very 
low,  for  the  reason  that  small  borrowing 
should  not  be  encouraged,  and  a  rate  of  one 
per  cent  a  month  may  be  a  proper  minimum 
for  such  loans,  and  two  per  cent  may  not  be 
unreasonable.  The  cost  of  administration  in 
the  case  of  the  pawnshop  is  high,  but,  not 
withstanding  this,  the  net  earnings  may  be  suf- 
ficient to  add  materially  to  the  attractiveness  of 
the  savings  banks  in  the  way  of  a  higher  interest 
rate.  Hence,  there  would  still  be  a  motive  for 
the  co-operation  of  these  two  institutions. ' 

^  The  Monte  di  Piete  began  centuries  ago  to  serve  the  Italian 


MUNICIPAL   SAVINGS   BANKS  261 

The  separate  savings  banks  under  munici- 
pal control  were  not  long  in  developing  among 
the  strong  German  towns  after  private  insti- 
tutions had  come  into  existence.  Karlsruhe  is 
said  to  have  established  the  first  bank  of  this 
class  at  the  beginning  of  this  century,  ^  and 
the  Berlin  Stddtische  Sparkasse  was  founded 
in  1818. 3  This  system  has  been  extended  not 
only  to  the  large  cities,  but  also  to  the  small 
towns  and  villages,  and  even  to  the  rural  com- 
munities, becoming  by  all  means  the  dominant 
type,  not  only  in  Germany  but  also  in  Austria 
and  France,  and  despite  the  fact  that  they 
come  into  competition  with  the  postal  savings 
banks  in  the  two  latter  countries.  They  are 
also  found  in  considerable  number  in  Italy, 
and  to  some  extent  in  Denmark,  Sweden  and 

cities  as  savings  banks  as  well  as  loan  offices,  and  the  one  at 
Rome  was  popular  with  all  classes.  This  form  of  institution 
has  had  a  very  wide  use  and  it  still  survives  in  parts  of  France, 
Spain  and  Brazil.  The  general  development  of  municipal  sav- 
ings, however,  has  been  in  the  form  of  a  distinct  institution. 
See  H.  Wolff,  Journal  of  Royal  Statistical  Society,  June,  1897. 

^Maltbie,  Municipal  affairs,  December,  1898,  p.  752. 

^ Statistiches  Addressbuch  der  Sparkassen  Deutschlands,  p.  218 


262  SAVINGS    INSTITUTIONS 

Japan,  and  there  is  one  in  Riga  in  Eussia,  and 
the  cantonal  savings  banks  in  some  of  the 
Swiss  cities  are  practically  of  the  same  char- 
acter. 

This  type  is  found  in  its  most  extensive, 
intensive  and  interesting  development  in  the 
different  states  of  Germany,  where  it  receives 
moral  support  from  the  scholar  and  from  the 
upper  classes.  Here  they  are  public  institu- 
tions, but  they  are  scarcely  more  democratic 
in  their  administration  than  are  the  trustee 
banks  of  England  and  America.  In  this  con- 
nection it  must  be  remembered  that  the  city 
governments  of  Germany,  owing  to  their 
three  group  system  of  voting,  are  under  the 
control  of  the  propertied  classes.  Unprop 
ertied  classes  are  represented  in  the  city  coun- 
cil, but  they  must  always  be  in  a  very  small 
minority.  In  the  councils,  particularly  in  the 
larger  cities,  the  scholar  element  is  likely  to 
be  weU  represented,  and  perhaps  the  German 
cities  share  with  the  English  the  distinction  of 
having   the   most    intelligent  and  competent 


MUNICIPAL   SAVINGS   BANKS  263 

city  councils  in  the  world.  Ample  evidence  of 
this  intelligence  is  found  in  the  splendid 
municipal  savings  banks,  which  are  designed 
primarily  for  the  benefit  of  the  class  which 
has  no  controlling  vote  in  the  affairs  of  the 
city.  Hence,  they  are  not  open  to  the  charge, 
often  made  in  the  case  of  state  and  federal 
social  legislation,  such  as  the  workingmen's 
insurance  law,  that  they  are  made  as  a  bid  for 
the  votes  of  the  working  classes,  who  show 
an  increasing  disposition  to  join  the  Social 
Democrats.  Municipal  laws  are  not  enacted 
under  pressure  of  democratic  radicalism,  and 
such  measures  as  the  savings  banks  are  the 
result  of  an  enlightened,  unimpassioned  upper- 
class  philanthropy.  The  explanation  of  this 
is  to  be  found  in  the  fact  that  the  Germans, 
as  a  highly  social  people,  have  a  keen  apprecia- 
tion of  the  social  needs.  ^ 

^  Savings  institutions  exist  at  present  in  Germany  in  great 
niimber  and  in  great  variety,  including:  State  or  Providence 
Savings  Banks,  City  Savings  Banks  {StMtiscJie-Sparkassen); 
Township  Savings  Banks  {Landgemeinde  Sparkcissen) ;  County 
Savings  Bank,    {Kreis-  and   Amtsparkassen);  Bezirk  Savings 


264  SAVINGS    INSTITUTIONS 

The  typical  organization  consists  of  a  cen- 
tral office  and  a  system  of  sub-stations  situated 
about  the  city.  The  general  office  is  usually 
centrally  located,  with  respect  to  the  working 
classes,  the  sub-stations  are  located  with  par- 
ticular regard  to  their  convenience,  and  the 
time  of  opening  and  closing  is  suited  to  the 
customary  working  hours. 

It  will  be  easily  seen  that  the  sub-station 
feature  can  be  worked  out  by  the  municipality 
to  the  greatest  perfection,  for,  having  in  view 
their  educational  value,  it  seeks,  not  the  place 
of  the  greatest  patronage,  but  the  place  of  the 
greatest  need.  In  this  regard  the  advantage 
of  the  municipality  over  the  Post-Office  De- 
partment demands  special  emphasis.  The 
sub-stations  of  the  post-office  in  large  cities 
give  wide  currency  to  the  postal  savings  banks, 
but  they  seek  the  convenience  of  the  greatest 

Banks,  Private  Savings  Banks  (Privat   Sparkassen),  and  Co- 
operative Savings  Banks  {Vereine  Sparkassen). 

The  Bezirk  is  a  political  division  between  the  Kreis  and  the 
Province  or  state  which  has  no  counterpart  in  our  political 
arrangements. 


MUNICIPAL   SAVINGS   BANKS  265 

number  of  patrons  of  the  post-office,  who  are 
not  hkely  to  be  the  people  most  in  need  of  the 
savings  bank,  while  the  branch  of  the  city 
savings  bank  is  often  found  in  the  vicinity  of 
factories  or  of  tenement  houses. 

Some  of  the  cities  have  greatly  perfected 
systems  of  sub-stations.  Berlin  has  about 
seventy-five  of  them,  and  deposits  may  be 
made  and  withdrawn  and  interest  collected 
at  any  of  them,  as  at  the  main  office.  ^ 

The  central  office  of  the  Berlin  bank  is  an 
interesting  institution  during  office  hours.  It 
is  of  imposing  and  beautiful  exterior,  and  is 
centrally  located  on  an  island  of  the  Spree. 
The  second  floor  is  occupied  by  administrative 
offices  and  the  first  by  the  offices  for  deposit 
accounts.  These  offices  present  the  appear- 
ance of  an  aggregation  of  banks  rather  than 

^  Against  this  advantage  of  the  municipal  system  should  be 
set  the  carrier  system  of  the  postoffices.  The  postmen  may 
be  described  as  walking  savings  banks,  who  find  their  way  in- 
to every  part  of  the  city.  The  city  of  Frankfort-on-the-Main 
has  sought  to  remedy  this  defect  in  the  city  bank  by  establish- 
ing a  collection  system — a  messenger  going  from  house  to 
house  or  from  factory  to  factory. 


266  SAVINGS    INSTITUTIONS 

a  single  institution.  A  series  of  seven  or 
eight  deposit  places, — one  following  another, 
and  each  bearing  a  number,  and  each  being 
equipped  with  a  complete  complement  of 
book-keepers  and  tellers,  are  grouped  about  a 
large  room.  In  spite  of  the  numerous  sub- 
stations there  is  always  a  crush  at  the  central 
office  at  the  hour  of  opening,  and  the  new 
comer  might  be  bewildered  were  it  not  for 
the  excellent  administrative  organization. 
The  stranger  is  ushered  to  one  of  the  depart- 
ments, which  thereafter  he  will  seek  at  once. 
Thus,  the  crowd  breaks  up  into  as  many 
separate  groups  as  there  are  departments  in 
the  office.  All  rush  and  confusion  in  these 
httle  groups  is  avoided  by  a  system  of  num- 
bered checks.  One  is  given  to  each  patron  in 
the  order  of  his  coming  which  preserves  his 
place  in  lieu  of  standing  in  line,  and  he  may 
await  the  calling  of  the  number  of  his  check 
in  a  comfortable  chair.  All  the  writing  is 
done  by  clerks,  no  deposit  slips  or  withdrawal 
orders  being  required.     Mistakes  and  embar- 


MUNICIPAL  SAVINGS   BANKS  267 

rassments  on  the  part  of  the  depositors  are 
thus  avoided.  ^ 

Interest  centers  most  in  the  system  in  use 
in  Prussia,  not  that  it  is  the  most  developed — 
for  this  is  not  the  case — but  it  represents  about 
the  average  of  efficiency  among  the  German 
states,  and  it  reaches  by  far  the  largest  pro- 
portion of  the  population  of  the  Empire. 
Here  the  mechanism  of  the  system  has  been 
long   developed   and   thoroughly   understood. 

For  more  than  a  decade  no  new  or  novel 
features  have  been  introduced  as  remarkable 
patronage  winners.  Hence  the  following 
items  of  growth  must  stand  for  permanent 
strength.  In  1894  there  were  1471  savings 
banks  of  all  classes;  at  the  close  of  the  year 
1899  there  were  1573,  showing  an  increase  for 

^  This  provision,  while  intended  for  the  convenience  of  the 
poorer  classes,  is  open  to  criticism,  in  that  it  exposes  the  ac- 
counts to  the  danger  of  loss  by  the  theft  of  books.  The 
money  is  paid  upon  verbal  request,  to  the  holder  of  the 
book — which  is  thus  rendered  almost  as  tempting  to  the  dis- 
honest as  cash.  The  only  protection  consists  in  the  provision 
that  not  more  than  100  marks  may  be  withdrawn  in  a  single 
month  without  special  authority. 


268  SAVINGS    INSTITUTIONS 

each  year  of  about  twenty.  If  all  branches 
and  deposit  stations  are  included  the  compari- 
son shows  3,809  places  of  deposit  in  1894 
against  4,371  in  1899.  The  amount  of  the 
deposits  between  these  periods  increased  from 
3,551,687,851  marks  to  5,577,020,151  marks. 
The  growth  has  been  more  than  proportional 
to  the  increase  in  population.  There  were 
25.29  depositors  in  1899  for  every  100  of  the 
population  an  increase  from  20.1  in  1893. 

The  increase  in  patronage  has  been  of  una- 
bated strength  since  the  reliable  records  begin 
in  1851,  when  there  were  368,955  depositors, 
the  average  for  each  year  being  about  200,000. 

The  rate  of  growth  after  the  maturity  of 
the  system  should  be  considered  in  connection 
with  the  system  of  compulsory  insurance,  to 
which  the  conditions  are  not  yet  wholly  ad- 
justed. This  may  be  characterized  as  an  op- 
posing current.  The  compulsory  payments 
into  the  insurance  fund  must  tend  to  under- 
mine the  power  of  the  working  classes  to 
keep  up  their  savings  bank  accounts.     This, 


MUNICIPAL   SAVINGS   BANKS  269 

however,  has  probably  been  more  than  offset 
by  the  remarkable  industrial  awakening  of 
the  German  states  in  the  past  decade.  And 
the  most  wholesome  element  to  be  observed 
is  the  evidence  that  the  working  classes  are 
providing  against  reverses  during  the  period 
of  prosperity. 

The  strength,  and  at  the  same  time  the 
weakness,  of  the  municipal,  or  local,  system 
may  be  best  seen  in  Prussia,  where  the  condi- 
tions are  so  favorable  for  its  development. 
The  following  table  giving  the  record  for  the 
different  provinces  at  the  close  of  1899  may 
reveal  them  almost  at  a  glance : 

Province  Number      Nnmber  DeposiU  in       '^?J!]?P' 

Province  ^^.  ^^^^^.^    ^^  ^^^^.^  „^^^,.^.^        ^m>^of^ 

East  Prussia 43  208,697  99,284,695  10.20 

West  Prussia 40  196,504  193.813,375  12.73 

City  of  Berlin 2  685,264  254,657,845  38.99 

Brandenburg 197  911,753  4oO,.W),253  29.89 

Pomerania 75  395,894  2(i2,()(l4,si4  24.47 

Posen 78  188,806  99,412,215  9.98 

Schleswig 166  1,112.398  4S4, 71 1,492  24.34 

Saxony 135  1,091,391  590,762,570  39.04 

Schleswig-Holstein..  .  281  548,086  535,388,158  40.87 

Hanover 179  865,347  685,874,472  34.08 

Westphalia 176  680,594  895,229,631  23.27 

Hessen- Nassau  83  464,531  260,272,943  25.35 

Rhenish-Prussia 207  1,076,991  859,224,999  19.84 

Hohezollern 1  23,187  15,773.789  25.29 

Kingdom  of  Prussia...  1,663    8,449,443    5,666,920,056     25.29 


270  SAVINGS    INSTITUTIONS 

The  strength  of  the  system  is  shown  in  the 
phenomenal  records  of  the  City  of  Berhn,  and 
the  Provinces  of  Saxony  and  Schleswg-Hol- 
stein,  and  its  weakness  in  the  relatively  low 
records  of  East  and  West  Prussia  and  Posen. 
The  provinces  with  large  urban  populations 
are  apt  to  be  well  supplied  with  banks,  and 
they  are  likely  to  be  well  patronized,  but  the 
more  rural  provinces  are  likely  to  be  neglected. 

The  legal  aspects  may  be  thus,  in  a  general 
way,  summarized: 

'^„'.  There  is  no  general  statute  under  which 
savings  banks  may  be  organized,  although 
such  a  measure  is  likely  to  result  from  the 
sentiment  in  favor  of  it,  but  every  one  must 
now  be  created  by  a  special  statute. 

In  framing  such  statutes,  local  conditions 
are  carefully  considered,  and  the  public  guar- 
antees must  be  laid  before  the  government's 
representative,  (Regierungsprcisident)  and  ap- 
proved by  him. 

The  political  divisions,  such  as  the  munici- 
palities, the  county  (or  Kreis)  gverning  bodies, 
etc.,  which  guarantee  their  savings  banks, 
have  the  immediate  oversight  of  them;  next 
comes  the  supervision  of  the  administrative 
council  (Landrathe),  and  finally  the  head 
supervision  of  the   Oberregierungs-Prcisidentj 


MUNICIPAL  SAVINGS   BANKS  271 

and  in  special  cases  the  chief  supervising 
authorities  are  responsible  for  the  faithful 
administration  of  affairs. 

The  municipal  authorities  determine  the 
business  methods  employed  and  the  kind  of 
book-keeping,  and  from  time  to  time  inspect 
the  books  and  the  general  conditions. 

The  banks  possess  the  character  of  private 
corporations  in  so  far  that  they  may  make 
binding  contracts  in  their  own  name,  own 
property,  and  sue  and  be  sued  in  the  courts. 

The  municipality  exercises  the  right  lo 
choose  the  curators,  directors,  or  official  heads, 
as  well  as  the  other  officials  of  their  banks. 
Is  also  prescribes  rules  and  regulations  re- 
specting terms  of  employment,  precautionary 
measures,  the  compensation  of  employees, 
the  pensioning  of  employees  and  their  dis- 
charge for  incompetency  or  other  causes. 

Married  women,  without  the  concurrence  of 
their  husbands,  and  minors  without  the  con- 
currence of  their  legal  representatives  may 
make  savings  deposits. 

At  present,  most  savings  banks  are  required 
by  their  statutes  to  set  aside  a  certain  part  of 
each  years 's  net  earnings  to  create  a  reserve 
fund  until  a  reserve  of  from  5  to  10  per  cent 
of  the  deposits  is  reached,  and  there  is  now  an 
attempt  being  made  to  require  a  reserve  of  10 
per  cent  for  all  banks. 

It  is  the  custom  to  set  aside  about  one  per 
cent,  to  cover  the  cost  of  administration.  The 
actual  cost,  however,  has  only  been  from  0.60 


272  SAVINGS    INSTITUTIONS 

to  0.75  per  ceot.  Formerly  the  difference 
went  into  the  city  or  other  municipal  revenues, 
but  it  is  now  added  to  the  reserve  funds. 

In  the  placing  of  funds,  a  wide  discretion  is 
exercised  as  to  the  kinds  of  security  received. 
A  proposed  law  would  require  that,  at  least, 
ten  per  cent  of  the  funds  be  invested  in  Prus- 
sian or  German  bonds ;  and  that  loans  on  city 
or  country  real  estate  be  limited  to  fifty  per 
cent  of  the  deposits,  except  where  the  permis- 
sion of  the  supervising  board  is  obtained,  when 
it  is  proposed  to  extend  the  limit  to  sixty  per 
cent.  The  savings  banks  must  each  year  pub- 
lish their  reports  and  submit  them  to  the 
approval   of    the  Minister    of    the  Interior.  ^ 

Private  savings  banks,  after  the  pattern  of 
our  trustee  system,  co-operative  banks,  and 
savings  banks  connected  with  other  institu- 
tions are  often  found  flourishing  in  the  same 
localities  as  the  municipal  banks.  To  a  cer- 
tain extent,  they  may  cater  to  a  different  class 
of  customers,  and  to  a  considerable  extent, 
they  may  be  feeders  to  the  other  banks.  ^ 

A  plan  for  developing  a  regular  impulse  for 
saving,  something  after  the  manner  of   the 

^Die  Spurkassen,  March  5,  1896. 

^  Zcitschrift  des  K.  Saclmsclien  Statistischen  Bureaus,  Jahr- 
gang  1895,  pp.  6  and  7. 


MUNICIPAL  SAVINGS  BANKS  273 

building  associations  though  less  rigorous  in 

its  requirements,  has  been  adopted  in  recent 

years  in  a  number  of  cities.     This  plan  Mr. 

Walter  Schumann,  United  States  Consul  at 

Mainz,  describes  as  follows: 

The  City  Savings  bank  inaugurated  a  novel 
method  for  inducing  people,  especially  the 
laboring  class  and  small  shop  keepers,  to  save 
their  money.  Instead  of  obliging  the  people 
to  come  to  the  savings  bank,  the  bank  under- 
took to  collect  from  the  depositors  certain  fixed 
sums  weekly.  The  following  is  the  method 
pursued :  The  application  of  the  new  depositor 
is  made,  either  in  person  or  by  letter,  and 
must  state  the  address  at  which  the  weekly 
deposit  is  to  be  collected  and  the  amount. 
This  amount  may  be  either  50  pfennings  or  1, 
2,  3,  4,  5,  or  10  marks  (1  mark=23.8  cents). 
The  amount  to  be  collected  may  be  changed 
at  any  time.  On  payment  of  the  first  deposit, 
the  depositor  is  furnished  with  a  pass-book,  in 
which  the  deposit  of  the  first  amount  and  the 
date  is  entered.  The  following  weekly  de- 
posits are  not  entered  when  collected,  but  only 
on  presentation  of  the  pass-book  at  the  bank 
when  a  withdrawal  of  money  is  made  or  at 
the  end  of  the  year  to  balance  the  account. 
The  weekly  amount  is  collected  by  employees 
of  the  institution  and,  as  a  receipt,  the  de- 
positor is  given  a  printed  coupon,  showing  the 
amount  collected,  the  date,  and  the  number  of 
the   pass-book.     In    order   to   insure   prompt 


274  SAVINGS    INSTITUTIONS 

payment,  a  coupon  is  presented  by  the  col- 
lector. If  a  coupon  which  has  been  returned 
to  the  bank  l)y  the  collector  as  unpaid,  is  not 
paid  within  eight  days,  the  institution  re- 
serves the  right  to  close  the  depositor's  account. 
All  deposits  made  during  one  year  draw  inter- 
est from  the  first  of  January  of  the  following 
year.  The  rate  of  interest  is  the  same  as 
paid  by  the  savings  banks  on  its  ordinary 
accounts — at  present  3  J  per  cent.  Depositors 
may  withdraw  at  any  time  on  presentation  of 
the  pass-book  and  the  coupon  for  the  last  pay- 
ment. ^ 

1  Following  are  the  statistics  of  this  branch  of  the  savings 
bank  for  the  years  1896  and  1897: 

COLLECTED   FROM   DEPOSITORS 
Marks 

1897 740,208.50 . . .  .$176,170 

1896 694,923.50. . . .  165.392 

WITHDRAWN    BY    DEPOSITORS 

1897 649,671.05. . . .   154.632 

1096 595,334.51.  . .  .   141.656 

At  the  close  of  the  year  1897,  there  was  a  balance  of  575,- 
758.01  marks  ($137,030)  due  5,485  depositors.  At  the  close  of 
the  year  1896,  there  was  a  balance  of  474,375.19  (|113,663)  due 
5,263  depositors. 

On  January  1st,  1898,  the  number  of  depositors  (including 
new  applicants)  amounted  to  5,799  making  a  weekly  deposit 

of  15,564  marks  (|3,704)  and  classified  as  follows: 

Persons 

Depositing  50  pfennings  (11.9  cents)  per  week. .    344 

Depositing    1  mark  (33.8  cents)  per  week 1,697 

Depositing    3  marks  (47.6  cents)  per  week 1.730 

Depositing    3  marks  (71.4  cents)  per  week 973 

Depositing    4  marks  (95.3  cents)  per  week 194 

Depositing    5  marks  ($1.19)  per  week 604 

Depositing  10  marks  ($2.38)  per  week 357 

Total 5,799 


MUNICIPAL   SAVINGS   BANKS  275 

Mr.  August  Scherle,  editor  of  the  Berlin 
Local  Anzeiger,  is  the  author  of  another 
scheme  similar  to  this,  which  proposes,  first, 
through  the  administration  of  the  Prussian 
state,  and,  eventually,  through  the  Govern- 
ment of  the  Empire,  to  utilize  the  wide  spread 
passion  for  lottery  play  in  Germany  in  the  in- 
terest of  the  saving  habit.  This  passion  is 
now  fostered  by  the  practice  of  the  state  mak- 
ing the  lottery  a  source  of  public  revenue. 
Mr.  Scherle  proposes  to  change  this  force  from 
a  dissipating  to  a  conserving  energy.  His 
scheme  contemplates  the  opening  of  the  bank 
for  deposits  and  making  them  earn  interest 
in  the  usual  way ;  but  to  bear  a  uniform  rate 
of  interest  of  only  one  and  seven-tenths  per 
cent,  the  remainder  of  the  earnings  to  be 
divided  up  into  prizes  according  to  the  follow- 
ing table : 

1  prize    of  100,000  M.  100,000  M. 

1  prize    of  30,000  M.  30,000  M. 

1  prize    of  10,000  M.  10,000  M. 

2  prizes  of  5,000  M.  10,000  M. 
10  prizes  of  2,000  M.  20,000  M. 


276  SAVINGS   INSTITUTIONS 


15  prizes  of 

1,000  M. 

15,000  M. 

30  prizes  of 

500  M. 

15,000  M. 

100  prizes  of 

200  M. 

20,000  M. 

200  prizes  of 

100  M. 

20,000  M. 

1,000  prizes  of 

50  M. 

50,000  M. 

2,720  prizes  of 

30  M. 

81,600  M. 

8,420  prizes  of 

20  M. 

168,400  M. 

12,500  prizes. 

540,000  M. 

The  depositors  who  conform  to  the  condi- 
tions are  to  be  divided  into  blocks  for  the  dis- 
tribution of  prizes,  each  block  containing 
300,000  full  chances,  and  12,500  prizes  will  be 
divided  among  the  holders  by  lot.  The  con- 
ditions are  that  regular  deposits  be  made  for 
a  period  of  six  months.  For  example,  a 
weekly  deposit  of  four  marks  would  entitle 
the  depositor  to  a  whole  chance,  of  two  marks, 
of  half  a  chance,  and  of  one  mark  to  a  fourth 
of  a  chance,  and  thus  every  regular  depositor 
of  four  marks  a  week  for  six  months  would 
have  an  equal  chance  at  winning  a  fortune  of 
100,000  marks.  The  chances  would  likely  be, 
as  the  author  assumes,  a  greater  stimulant  to 
saving  than  the  low  rate  of  four  per  cent  per 
annum  now  paid.     It  is  hard  to  find  any  ob- 


MUNICIPAL   SAVINGS   BANKS  277 

jection  to  this  scheme  as  designed  for  the  Ger- 
mans, and  it  can  readily  be  seen  how  it  might 
greatly  intensify  the  saving  habit.  Beginning 
with  an  investment  of  one-fourth  of  a  share, 
or  a  deposit  of  one  mark  per  week,  the  weekly 
deposit  might  increase  to  several  full  shares, 
and  every  prize  won  in  the  neighborhood  would 
furnish  a  new  zest  to  the  holding  of  shares  in 
the  savings  bank.  Objections  on  moral 
grounds — that  it  would  be  a  further  sanction 
by  the  state  of  games  of  chance,  would 
doubtless  have  some  force,  and  such  an  objec- 
tion would  be  conclusive  in  America. 

Much  has  also  been  said  about  making  the 
city  savings  banks  serve  other  reform  meas- 
ures. The  idea  of  making  it  a  part  of  a 
municipal  pawnshop  system,  like  the  one  in 
use  in  Madrid,  is  sometimes  suggested. 

It  is  also  suggested  that  the  funds  be  turned 
to  the  aid  of  tenement  house  reform,  and  a 
start  in  this  direction  has  been  made  by  the 
city  of  Heidelberg,  a  portion  of  the  savings 
deposits  being  invested  in   model   tenement 


278  SAVINGS   INSTITUTIONS 

houses.  These  are  for  the  use  of  laborers 
who  are  in  the  employ  of  the  city  and  the  rents 
are  deducted  from  their  wages.  By  fixing 
the  rent  only  a  little  higher  than  the  amount 
of  the  interest  charged,  the  city  is  able  to  fur- 
nish its  employees  with  model  tenements  at  a 
very  low  cost,  and  at  the  same  time  it  is  able 
to  create  a  fund  for  the  gradual  repayment  of 
the  principal  advanced. 

The  different  types  of  savings  banks  do  not 
seem  to  group  themselves  in  distinct  territories, 
but  they  exist  side  by  side: — the  different 
countries  reproducing  the  same  types. 

In  Prussia,  Saxony,  and  Bavaria,  the  differ- 
ent types  are  almost  identical.  In  the  King- 
dom of  Wurtemberg  the  District,  or  Oberant 
type  is  greatly  in  the  majority,  and  in  the 
Grand  Duchy  of  Hessen- Darmstadt  there  is  a 
plurality  of  savings  and  loan  associations.  ^ 

The  Duchy  of  Brunswick  contains  a  ducal 
savings  and  loan  bank  with  numerous  branches 

^  Created  for  the  accomodation  of  borrowers  as  well  as 
depositors. 


MUNICIPAL   SAVINGS   BANKS  279 

over  the  duchy ;  and  what  might  be  called,  in 
a  loose  sense,  state  savings  banks,  also  exist 
in  the  Grand  Duchy  of  Oldenburg,  in  the 
Duchy  of  Gotha,  and  in  the  Principality  of 
Reuss. 

The  degree  of  uniformity  of  types  is  due  to 
the  degree  of  uniformity  in  the  character  of 
political  organization,  to  the  general  interest 
in  the  subject,  and  to  familiarity  with  its  lit- 
erature. The  tendency  to  uniformity  has 
doubtless  increased  during  the  last  two  decades 
by  the  assembling  of  Savings  Bank  Congresses 
and  the  organization  of  state  and  Imperial 
savings  bank  unions — all  with  the  purpose  of 
the  improvement  and  the  extension  of  the 
present  systems.  These  bodies  have  consid- 
ered such  questions  as  the  five  and  ten  pfen- 
ning saving  card  system,  similar  to  the  stamp 
cards  of  the  postal  banks ;  the  establishment 
of  school,  youth  and  confirmation  savings 
banks;  and  the  most  important  question  of 
provision  for  transferring  accounts  from  one 
bank  to  another. 


280  SAVINGS    INSTITUTIONS 

The  purpose  among  German  savings  banks 
of  reaching  the  poorer  classes  is  every  where 
apparent.  This  point  is  kept  so  much  in  evi- 
dence that  it  may  be  a  cause  of  surprise  that 
they  have  not  taken  on  too  much  the  charac- 
ter of  a  charity  in  the  pubhc  mind  and  suffered 
in  the  loss  of  patronage  on  account  of  it.  The 
Wurtemberg  bank  is  open  only  to  specified 
classes ;  and  the  general  custom  of  estabhsh- 
ing  a  maximum  deposit  account,  and  some- 
times of  fixing  a  maximum  sum  that  will  be 
received  in  a  single  deposit,  are  designed  to 
exclude  the  well  conditioned  classes.  But  the 
purpose  is  not  always  reahzed.  At  least  the 
writer  after  many  personal  visits  to  the  sav- 
ings banks  in  different  parts  of  Germany  is 
well  satisfied  that  a  considerable  per  cent  of 
the  patrons  belong  to  the  small  merchant  class, 
and  to  the  children  of  well-to-do  families, 
— and  that  the  professional,  military  and  lei- 
sure classes  are  also  numerously  represented. 
In  fact,  people  of  no  class  seem  to  be  de- 
terred from   enjoying  the  benefits  from  any 


MUNICIPAL   SAVINGS   BANKS  281 

sense  of  its  being  a  charitable  institution. 
The  size  of  the  deposit  account  cannot  be 
taken  as  an  accurate  criterion  of  the  class  to 
which  the  depositor  belongs ; — instead  of  the 
small  depositor  being  a  workman  with  a  very 
small  income,  or  a  person  who  has  been  hither- 
to improvident,  he  may  often  prove  to  be  a  child 
of  wealthy  parents.  But  in  either  case,  it 
shows  that  the  bank  is  accomphsliing  its  pur- 
pose, for  it  is  sought  to  reach  the  children,  as 
a  class,  regardless  of  the  condition  of  their 
families.  In  so  far  as  this  may  be  taken  as 
an  index  to  the  condition  of  the  patrons  the 
following  table  from  the  report  from  the  sav- 
ings banks  of  Saxony,  showing  the  percentage 
of  depositors  falling  to  each  class  for  different 
years,  will  show  that  a  relatively  small  per- 
centage of  the  business  comes  from  the  most 
desirable  classes  and  that  a  very  considerable 
amount  of  business  comes  from  persons  whose 
economic  condition  must  be  pretty  comfort- 
able. It  shows,  however,  a  remarkably  uni- 
form growth  in  each  direction,  the  relative 


282  SAVINGS    INSTITUTIONS 

strength   varying    less    than    one    per  cent: 

T^^ TT„,,„^.  ,.„  \r        Between  60       Between  150       n„^~  i^nr>  \r 

Year  Under  60  M.       and  150  M.        and  600  M.         Over  600  M. 

1889 36.7 15.7 26.4 21.2 

1890 36.4 15.6 26.6 21.4 

1891 36.6 15.4 26.6 21.4 

1892 36.5 15.4 26.3 21.8 

1893 36.3 15.4 26.4 21. 9^ 

The  fact,  made  evident  in  the  table,  that  the 
share  of  the  lowest  class  in  the  total  business 
seems  to  be  growing  slightly  less  while  the 
share  of  the  better  conditioned  classes  is  in- 
creasing might  be  taken  as  an  unfavorable 
sign  if  it  were  a  country  that  had  not  been 
pretty  thoroughly  worked  by  the  savings 
banks.  In  the  pioneering  stage  a  large  in- 
crease in  the  number  of  small  depositors  is  a 
most  healthful  sign.  In  Saxony,  however, 
where  savings  culture  has  been  carried  to  so 
high  a  development,  a  strengthening  of  the 
saving  power  within  the  ranks  of  persons  who 
are  already  depositors  might  be  taken  as  a 
better  test. 

The  following  two  reports  from  the  muni- 
cipal   banks    of  Bachum    and    Dortmund  in 

^  Report  of  the  Statistical  Bureau  for  1895,  p.  60. 


MUNICIPAL   SAVINGS   BANKS 


283 


Westphalia,  for  1891,  seem  to  show  that  the 
patronage  is  hkely  to  come  to  a  considerable 
extent  from  the  better  conditioned  classes : 

BACHUM 

398  Journeymen with       150,168  M.  deposited 

390  Factory  hands with       421,874  M.  deposited 

2,070  Miners  and  Smelters with  2,228,910  M.  deposited 

517  Servants with  225,195  M.  deposited 

244  Other  persons  of  working 

classes with  257,195  M.  deposited 

399  Masters with  773,297  M.  deposited 

6,201  Other  depositors with  9,781,794  M.  deposited 

10,419  Depositors with  13,838,669  M.  deposited 

DORTMUND 

1,174  Journeymen  &  assistants .  with  447,353  M.  deposited 

893  Factory  hands with  344,340  M.  deposited 

2,562  Miners  and  Smelters with  2,391,118  M.  deposited 

1,495  Servants with  359,822  M.  deposited 

923  Other  persons  of  working 

classes with  1,045,229  M.  deposited 

1,370  Masters with  2,825,532  M.  deposited 

1,418  Fanners with  7,555,842  M.  deposited 

563  Financial  Agents with  643,393  M.  deposited 

14,438  Other  persons,  including 
about  1,600    children 

from  pfennig  banks,  .with  8,224,737  M.  deposited 

24,836  Depositors with  23,837,366  M.  dep.i 

The  following  table  of  city  banks  in  the 
Principality  of  Lippe,  where  more  than  fifty 
per  cent  of  the  people  have  investments  in 

^  Schnftender  Centralstellefur  Arbeiter-  Wohlfahrtseinrichtun- 
gen.     No.  8,  p.  15.     Carl  Hermanns,  Berlin. 


284  SAVINGS    INSTITUTIONS 

savings  banks,  shows  that  they  are  reaching 
the  right  classes : 

Falling  to  the  working 
classes  out  of  the  total. 
No.  of  Books       AiiVt  of  Deposits         Books  Deposits 

Salzufen 5,596 7,202,989  M 15%    about    43^ 

Tage 8,005 2,881,400  M 75^  75^ 

Lage 2,()10 2,550,306  M 30^  25^ 

Horn 1,088 341,765  M 51^  35^ 

Blomberg. .  .9,309 2,239,420  M 66^  35^ 

Proof  conclusive  that  the  desired  persons 
are  reached  by  the  German  savings  banks  is 
found  in  the  extraordinary  percentage  of  the 
whole  people  who  resort  to  them.  Where  as 
many  as  one-fifth  of  the  population,  as  in  the 
case  of  five  of  the  German  states,  according 
to  the  census  of  1890,  or  one- third,  as  in  the 
case  of  eight  states  or  about  one-half,  as 
in  the  case  of  five  states — including  the  City 
State  of  Bremen — there  can  be  no  doubt  that 
a  very  large  percentage  of  the  working  people 
are  included  among  its  patrons.  It  is  certainly 
a  remarkable  showing  for  a  country  of  the 
size  of  the  German  Empire,  which  had  a  popu- 
lation of  49,433,000,  according  to  the  census 
of  1890,  to  have  on  an  average,  21.3  savings 


MUNICIPAL   SAVINGS   BANKS  285 

bank  depositors  out  of  every  100  of  the  popu- 
lation. Some  of  the  individual  records  al- 
most surpass  belief,  as  that  of  the  free  city  of 
Bremen,  where  there  is  a  savings  account  for 
every  1.4  of  the  population;  of  the  Principal- 
ity of  Reuss,  of  the  Younger  Line,  where 
there  is  an  account  for  every  1.8  of  the  popu- 
lation; of  the  Principality  of  Lippe,  where 
there  is  an  account  for  every  1.9  of  the  popu- 
lation; and  especially  of  the  Kingdom  of 
Saxony,  with  its  extraordinary  density  of 
population,  where  there  is  an  average  of  one 
savings  account  for  every  2. 1  of  the  population. 
The  best  average  results  seem  to  be  realized 
in  the  more  petty  states  and  in  the  city  states. 
The  states  with  populations  ranging  under 
200,000  would  make  a  much  better  average 
showing  than  the  larger  ones,  a  fact  which 
may  be  interesting  in  showing  the  fruits  of  the 
large  measure  of  local  autonomy  enjoyed  by 
the  Germans.  Their  high  development  in  cul- 
ture lines,  as  seen  in  the  municipal  opera,  in 
the  splendid  parks,  and  in  the  art  collections, 


286  SAVINGS    INSTITUTIONS 

may  be  attributed  in  large  measure  to  the 
large  local  autonomy  allowed  to  the  munici- 
pahties.  And  it  may  be  said  that  without 
such  hberty  of  local  activity  these  results  could 
not  have  followed.  Where  both  the  state  and 
the  municipal  spirit  are  localized  they  should 
possess  even  a  more  intensive  character,  and 
consequently  better  results  might  be  expected 
to  flow  from  organized  public  activities.  The 
highly  organized  local  spirit  seems  to  have 
made  Germany  the  best  country  to  develop 
the  germ  of  the  savings  bank,  to  make  of  it 
a  public  institution,  and  to  furnish  to  the 
world  illustrations  of  the  possibilities  of  its 
usefulness. 

The  interest  paid  varies  somewhat  for  differ- 
ent places,  and  according  to  the  policy  of  the 
bank.  The  savings  banks  are,  with  few  ex- 
ceptions, operated  entirely  in  the  interest  of 
the  depositors,  and  the  interest  is  supposed 
to  represent  th(>  net  earnings  of  the  deposits. 
The  rate  is  generally  about  four  per  cent,  or 
al)out  the  same  as  that  received  by  the  patrons 


MUNICIPAL   SAVINGS   BANKS  287 

of  the  American  savings  banks,  a  rate  which 
gives  evidence  of  singular  economy  in  admin- 
istration and  extraordinary  wisdom  in  the 
placing  of  funds. 

The  German  municipal  banks  are  character- 
istically bold  in  the  placing  of  their  deposits 
— they  invest  in  real  estate  securities  as  freely 
as  do  our  trustee  banks  in  America.  And  so 
far  from  following  the  orthodox  poHcy  of  in- 
vestment (public  securities)  the  policy  is  de- 
cidedly the  other  way.  Consideratious  of 
safety,  simplicity,  and  convenience  are  made 
to  yield  to  the  consideration  of  a  larger  inter- 
est rate.  In  1893  the  investments  in  Prussia 
in  real  estate  securities  had  reached  56.30  per 
cent  of  the  total,  and  in  Saxony  there  were 
339,839,000  marks  invested  in  this  class  of 
securities  against  only  10,577,000  marks  in 
public  securities.  ^ 

It  may  be  an  open  question  if  real  estate 


^  The  banks  are  allowed  even  a  wider  range  of  investment, 
as,  according  to  the  Zeitschrift  des  SacJmschen  Statistischen 
Bureaus  for  1895,  exchange,  bonds  of  corporations,  on  deposit 
of  chattels,  and  personal  securities. 


288  SAVINGS    INSTITUTIONS 

securities  in  Germany,  where  values  are  rela- 
tively stable,  are  not  the  more  conservative 
after  all.  Public  securities  are  purchased  in 
the  open  market,  and  their  value  is  constantly 
fluctuating,  hence  the  appreciations  over  the 
purchase  price  must  be  relied  upon  to  offset 
the  depreciations.  In  placing  loans  upon  real 
estate  a  hberal  margin  is  allowed  in  every 
case  for  depreciation  and  speculative  gains  are 
entirely  excluded.  This  class  of  loans  has 
also  the  advantage  of  yielding  a  higher  rate 
of  interest  than  state  securities.  In  Saxony, 
where  this  class  is  so  largely  resorted  to,  there 
is  a  correspondingly  higher  rate  paid  to  the 
depositors,  ranging  for  the  Kingdom,  between 
the  extremes  of  6  per  cent  and  3|  per  cent, 
with  an  average  of  4.23  per  cent.  ^ 

The  principle  of  the  regressive  rate  of  in- 
terest is  in  use  in  the  Principality  of  Reuss  of 
the  Younger  Line,  where,  instead  of  provid- 

^  The  Saxon  Banks,  notwithstanding  their  liberal  loaning 
policy,  also  maintain  low  reserves.  In  the  great  majority  of 
cases,  it  is  only  5  per  cent  of  the  total  deposits,  and  only  in 
rare  instances  is  it  as  high  as  10  per  cent. 


MUNICIPAL   SAVINGS   BANKS  289 

ing  for  a  maximum  account,  according  to  the 
usual  rule,  the  director  of  each  branch  office 
of  the  state  bank  is  authorized  to  begin  low- 
ering the  rate  of  interest  after  a  deposit  ac- 
count has  reached  300  marks. 

The  question  of  the  hour  in  regard  to  Ger- 
man saving  institutions,  and  still  the  unsettled 
question,  is  that  of  the  adoption  of  a  postal 
savings  system.  It  may  seem  singular  that 
Germany,  usually  so  energetic  and  fearless  in 
making  experiments  along  the  line  of  state 
activity,  the  pioneer  in  public  savings  banks, 
and  almost  surrounded  by  postal  savings  sys- 
tems, still  stands  aloof  from  this  step. 

Even  as  strange  may  sound  the  opposing 
views  on  this  subject.  On  the  one  hand  we 
hear  that  "  Alles  spricht  fur  uud  nichts 
gegen  die  Postsparkassen  "  ^ .  And  on  the  other 
hand  we  hear  very  cogent  reasons  against  its 
adoption  and  by  no  less  an  authority  than  Dr. 
Karl  Koscher.  2 

1  Dehn,  Zur  Einfuhrung  von  Reichspostsparkassen,  Annalen 
des  Beutsclien  Reichs,  1883,  p.  695. 

^  Roscher,  "  PostspwrkasHen  und  Lokalsparkassan." 


290  SAVINGS    INSTITUTIONS 

Among  the  arguments  advanced  against  it 
are: 

First,  because  the  local  system  serves  the 
community  in  an  all  around  manner,  the  bank 
both  receiving  deposits  from  the  citizens  of 
the  community  and  loaning  the  money  again 
to  be  used  in  the  same  place,  thus  keeping  the 
money  circulating  within  the  community  and 
aiding  local  enterprise. 

Second,  because  the  postal  savings  banks 
have  not  proven  so  successful  in  reaching  the 
working  classes. 

Third,  because  the  local  system  has  proven 
more  successful  than  any  other  according  to 
statistical  reports. 

Under  the  third  argument  it  is  urged  that 
more  of  the  German  people  patronize  the  sav- 
ings bank  in  proportion  to  the  population  than 
do  the  people  of  any  country  having  postal 
savings  banks  with  the  exception  of  Sweden 
and  France,  in  which  countries  the  local  sys- 
tem also  preponderates.  Germany  showed  in 
1890  one  savings  account  for  every  five  of  the 


MUNICIPAL   SAVINGS   BANKS  291 

population  against  5.7  for  England,  7.4  for 
Belgium,  8.2  for  Italy,  7.6  for  Holland,  5  for 
France,  7.1  for  Austria  and  3.5  for  Sweden.  ^ 

These  arguments  are  strengthened  by  a  com- 
parison of  postal  savings  countries  with  some 
other  countries  which  have  not  yet  adopted 
the  postal  savings  system.  Norway  has  a 
savings  account  for  about  every  4  of  the  popu- 
lation, and  Switzerland  shows  one  for  every 
3.6  of  the  population. 

The  question  arises  if  these  arguments  are 
not  rather  in  favor  of  the  local  system  than 
opposed  to  the  postal  system.  It  may  be  a 
question  whether  the  introduction  of  the 
postal  savings  banks  would  be  a  substitution 
of  the  state  for  the  local  system  or  whether 
it  would  prove  a  supplement  to  it.  Opinions 
might  differ,  first,  as  to  whether  the  postal 
banks  would  tend  to  drain  the  patronage 
away  from  the  other  banks,  and  second,  as  to 
whether  such  a  result  would  be  deplorable. 

^  Arbeiter-Wohlfdlirtseinrichtungeii,  No.  6,  p.  10-18. 


292  SAVINGS    INSTITUTIONS 

In  regard  to  the  first  point  experience  seems 
to  contribute  arguments  both  pro  and  con.  In 
England  the  postal  savings  banks  have  tended 
continually  to  sap  the  strength  from  the  other 
banks,  and  in  France  the  other  banks  have 
taken  on  new  life  since  the  establishment  of 
postal  savings  banks.  The  condition  of  France 
is,  however,  more  nearly  analogous  to  that 
of  Germany.  The  local  banks  are  more 
nearly  representative  of  the  people  of  the 
community,  and  they  are  to  a  large  extent 
municipal  banks.  For  different  reasons  they 
had  ceased  to  be  vigorous  and  active,  and  they 
seemed  to  need  just  the  tonic  which  the  rivalry 
of  a  state  system  could  supply.  In  England, 
on  the  other  hand,  the  former  dominant  sys- 
tem was  for  the  most  part  in  a  condition  to  be 
relieved,  and  it  may  be  assumed  that  the  trus- 
tees would  oppose  no  objection  where  the 
state  would  promise  to  render  a  better  service. 

There  can  be  little  question  that  the  German 
local  system  is  too  deeply  rooted  in  the  habits 
of  the  people  to  yield,  to  any  considerable  ex- 


MUNICIPAL   SAVINGS   BANKS  293 

tent,  to  a  state  bank,  and  it  is  even  doubtful 
if  a  state  bank  could  be  of  much  force  in  the 
neighborhood  of  a  strong  local  bank,  unless 
it  copied  its  policy  as  to  the  placing  of  loans. 

One  of  the  most  important  reasons  advanced 
for  supplementing  the  present  system  with  a 
post-office  system  is  the  service  which  it  could 
render  to  the  neglected  localities.  As  already 
indicated,  the  present  system  tends  to  follow 
the  line  of  economic  strength  and  to  avoid  the 
weaker  localities,  and  the  high  average  of 
work  comes  from  the  intensive  results  in  the 
strong  localities. 

Another  reason  for  the  change  grows  out  of 
conditions  pecuhar  to  Germany  which  call  for 
extraordinary  precautions  in  providence.  The 
state  or  city  provides  for  so  many  wants  that 
individual  providence  is  in  danger  of  falling 
into  neglect.  The  German  spends  so  much  of 
his  time  in  the  park,  the  promenade,  or  the 
public  inn,  that  the  things  which  the  people 
ordinarily  save  for, — a  home,  furniture,  a 
bit  of  ground,  etc.,   are  not  so  likely  to  be 


294  SAVINGS    INSTITUTIONS 

considered.  Indeed  the  social  habits  are  so 
highly  developed  that  they  are  a  continual 
menace  to  the  saving  power.  Geheimrat 
Prof.  J.  Conrad  contributes  a  strong  argument 
for  increased  vigilance  over  the  spending  habits 
when  he  says  in  his  Jahrbliclier  for  1895: 

' '  In  general,  we  Germans  consider  our- 
selves in  the  front  rank  in  all  state  and  eco- 
nomic equipment,  indeed  as  outstripping  most 
other  nations.  Especially  is  this  the  case 
where  the  state  takes  the  initiative.  In  one 
respect,  however,  are  we  inconceivably  behind 
other  countries,  viz.,  in  the  want  of  a  postal 
savings  institution.  It  is  particularly  strange 
that  we  are  so  far  behind  other  countries  in 
this  regard  in  view  of  the  fact  that  there  is 
scarcely  another  country  that  so  much  needs 
to  encourage  savings  as  Germany.  Our  sys- 
tem of  compulsory  insurance  has  diminished 
the  interest  in  saving.  Now  that  the  future 
is  cared  for,  there  is  great  danger  to  the  labor- 
ing people  of  getting  in  the  way  of  living  only 
for  the  day.  .  .  Both  in  an  economic  and 
an  ethical  sense  the  situation  is  deplorable. 
We  cannot  escape  from  this  reproach  by  show- 
ing that  there  has  been  no  backward  tendency 
in  saving  since  the  establishment  of  the  in- 
surance system.  Sufficient  time  has  not  yet 
elapsed  for  the  change  to  show  itself. ' ' 

The  municipal  banks  in  France  have  also 


MUNICIPAL  SAVINGS  BANKS  295 

proven  successful,  but  they  are  not  identical 
in  character  with  those  in  Germany.  And 
they  are  not  in  the  same  sense  local  institu- 
tions, being  subject  to  a  strict  central  regula- 
tion and  supervision.  They  are  not  allowed, 
for  instance,  to  administer  their  own  funds, 
but  they  are  obliged  to  turn  over  all  the  de- 
posits, except  an  emergency  reserve,  to  the 
' '  Caisse  des  Depots  et  Consignations  ' '  of  the 
central  government  and  they  are  then  invested 
in  the  same  manner  as  the  funds  of  the  post- 
office  bank.  The  local  banks  are  not  permitted 
to  distribute  all  of  the  net  earnings  among  the 
depositors,  but  a  certain  amount  is  required  to 
be  treated  as  a  surplus.  Such  limitations  up- 
on their  authority,  however,  have  not  pre- 
vented them  from  far  out-stripping  the  post- 
office  banks  and  they  seem  really  to  have 
been  benefited,  rather  than  injured,  by  the 
rivalry  of  the  state  system.  They  came  far 
short  of  supplying  the  needs  of  the  public 
prior  to  the  opening  of  the  post-office  to  de- 
positors,  and  they  have  experienced  a  very 


296  SAVINGS    INSTITUTIONS 

substantial  growth  since  then.  In  1881,  there 
were  only  541  savings  banks  with  800  sub-sta- 
tions. These  were  situated  only  in  the  more 
important  centers,  and  not  always  in  these. 
One  capital  city  of  a  department  and  fifteen 
chief  towns  of  Districts  were  wholly  without 
savings  facilities.  An  attempt  was  made  to 
remedy  this  condition  of  affairs  by  a  decree 
of  August  23d,  1873,  which  required  postmas- 
ters to  lend  their  aid  to  such  savings  banks  as 
might  wish  to  avail  themselves  of  it,  in  the 
collection  of  deposits.  It  was  hoped  that  this 
plan  would  carry  the  savings  facilities  to  the 
neglected  places.  But  it  proved  a  failure  and 
matters  did  not  improve  until  the  7,000  French 
post-offices  were  made  savings  banks  on  April 
9th,  1881. 

It  wiU  be  noted  that  the  municipal  banks  in 
France  contain  two  elements  of  great  strength, 
viz.,  the  security  of  the  general  government, 
and  the  enthusiasm  which  belongs  to  a  local 
institution.  For  they  are  local  in  every  re- 
spect, save  in  the  matter  of  the  placing  of  the 


MUNICIPAL  SAVINGS  BANKS  297 

funds,  and  having  a  general  national  surveil- 
lance. 

They  are  managed  by  local  boards  of  com- 
missioners, consisting  of  citizens,  who  serve 
without  pay,  and  the  local  policy  includes  all 
such  questions  as  banking  hours,  the  location 
of  collecting  stations,  and  any  special  features. 
And  the  facilities  are  arranged  solely  with  re- 
gard to  reaching  the  desired  classes  of  people. 

Another  explanation  of  their  success  is  to 
be  found  in  the  fact  that  they  are  peculiarly 
urban  institutions.  The  banks  in  the  large 
cities  have  a  decided  advantage  over  the  postal 
banks  in  being  able  to  devote  the  entire  time 
and  attention  of  the  directory  to  their  affairs 
without  losing  anything  in  the  way  of  econ- 
omy of  service. 

The  interest  rate  is  not  uniform,  because  of 
the  differences  in  the  cost  of  administration, 
but  varies  from  3  to  3J  per  cent. 

In  the  beginning  of  1894,  there  were  more 
than  2,000  deposit  places,  belonging  to  this 
class,  of  which  543  were  central  banks.    There 


298  SAVINGS    INSTITUTIONS 

were  6,173,000  depositors,  or  161  for  every 
1,000  of  the  population  and  the  average  account 
was  500  francs.  The  total  yearly  deposits 
amounted  to  1,000,000,000  francs,  and  the 
grand  total  of  deposits  amounted  to  consid- 
erably more  than  3,000,000,000  francs. 

The  City  of  Paris  is  exceptionally  well  sup- 
plied with  savings  institutions,  including  a 
private  system,  the  post-office  system  and  a 
municipal  system.  The  national,  or  post- 
office  system,  has  branches  at  convenient  dis- 
tances over  the  city.  But  the  "  Caisse 
d^Epargne  et  de  Prevoyance  ",  as  the  munici- 
pal system  is  called,  is  of  greater  local  popu- 
larity. Besides  its  great  central  establishment, 
in  the  Rue  Cop-Heron,  it  has  forty  branches 
situated  about  the  city  and  suburbs. 

The  number  of  depositors  increased  from 
582,000  in  1890  to  nearly  630,000  in  1893  and 
at  the  latter  date  one  inhabitant  of  the  city 
out  of  every  four  had  an  account  in  the  muni- 
cipal banks.  The  average  credit  amounted  to 
260  francs  but  almost  half  the  depositors  had 


MUNICIPAL  SAVINGS  BANKS  299 

accounts  ranging  in  amount  under  25  francs. 
The  inveitable  conclusion  of  this  study  is 
that  a  municipal  system  is  only  to  be  consid- 
ered in  relation  to  a  high  class  of  city  or  town 
governments,  but  that  within  this  class  it  at- 
tains the  very  best  results.  However  if  it  is 
the  only  system  in  use,  even  in  the  most 
highly  favored  countries,  large  sections  are 
sure  to  be  neglected. 


CHAPTER   IX 

POSTAL   SAVINGS   BANKS 

A  German  writer  has  said:  "  Everything 
speaks  for  and  nothing  against  the  postal  sav- 
ings bank, ' ' '  This  often  is  the  first  impression. 
The  post-office,  of  all  institutions,  seems  to  be 
the  best  adapted  to  carry  the  influence  of  the 
savings  banks  to  every  fireside.  The  most 
pervasive,  the  best  understood,  and  the  most 
familiar  institution  of  any  civilized  country  is 
the  post-office.  And  likewise  in  every  rural 
community  the  most  widely  known  individual 
is  the  postmaster,  and  in  every  urban  commun- 
ity the  most  familiar  individual  is  the  letter 
carrier.  In  the  more  primitive  and  backward 
communities  the  postmaster  is  often  the  friend 
and  counselor  of  the  poor.  If  an  illiterate 
man  receives  a  letter  which  he  cannot  read,  he 
naturally  asks  the  postmaster  to  read  it  for 


^See  page  289. 

(300) 


POSTAL   SAVINGS   BANKS  301 

him.  The  postmaster  meets  and  greets  more 
people  daily,  of  aU  sorts  and  conditions,  than 
any  other  member  of  the  community.  Thus, 
he  is  peculiarly  qualified  to  serve  the  savings 
bank,  which  requires  not  only  facilities  but 
missionaries.  The  success  of  such  an  institu- 
tion must  wait  upon  the  overcoming  of  a  de- 
gree of  shyness,  and  no  one  seems  so  well 
adapted  to  brush  this  away  as  the  postmaster. 

The  post-office  is  usually  located  with  respect 
to  the  convenience  of  the  greatest  number  of 
patrons.  These,  in  the  main,  will  prove  ex- 
cellent agencies  for  disseminating  a  general 
knowledge  of  the  institution,  since  they  repre- 
sent the  more  intelligent  members  of  the  com- 
munity. 

Over  against  this,  it  may  be  urged  that  the 
better  conditioned  classes  should  not  be  en- 
couraged. But  it  should  be  remembered  that 
the  exclusive  policy  tends  to  fasten  the  odium 
of  a  lower  class  institution,  and  that  an  in- 
clusive policy  adds  the  attractiveness  of  the 
crowd.     In  the  parlance  of  merchants  "  cus- 


302  SAVINGS    INSTITUTIONS 

torn  breeds  custom  ",  which  means  that  a 
large  volume  of  patronage  gathers  more  by 
accretion  than  a  small  one.  Very  often,  the 
person  excluded  might  prove  a  necessary 
medium  for  the  reaching  of  others  who  should 
be  reached.  Winning  the  mistress  to  the  hst 
of  depositors  may  be  the  means  of  reaching 
the  maid,  and  the  capitalist  may  bring  with 
him  a  number  of  his  employees. 

In  the  larger  cities,  it  must  be  said,  the 
post-office  does  not  seem  the  most  ideal  agency, 
in  so  far  as  the  location  is  concerned,  for  cul- 
tivating the  saving  habit.  Neither  the  cen- 
tral office  nor  the  branch  offices  are  places  of 
general  resort  to  anything  like  the  extent  that 
they  are  in  the  rural  communities.  And  even 
the  letter  carriers,  who  find  their  way  into 
every  neighborhood,  are  not  ideal  savings 
bank  missionaries ;  they  are  more  or  less  im- 
personal— like  the  wheels  of  a  great  mechan- 
ism ;  they  may  distribute  hterature  from  house 
to  house  advising  the  public  of  the  advantages 
of  the  savings  bank,  but  they  have  little  time, 


POSTAL  SAVINGS  BANKS  303 

and  perhaps  little  inclination,  to  make  many 
personal  explanations. 

But  the  post-office  seems  to  present  the 
requisite  machinery  for  a  truly  national  sys- 
tem— one  which  will  embrace  every  section. 
No  other  agency  can  possibly  accompUsh  such 
extensive  results  at  so  httle  cost  and  no  other 
can  be  sure  of  neglecting  no  community 
where  it  is  needed. 

It  would  seem  also  that  the  state  could  no- 
where employ  the  protective  principle  to  so 
good  a  purpose,  or  in  a  way  so  promising  of 
results,  for  the  method  is  calculated  to  hus- 
band large  productive  energy  in  places  where 
such  energy  is  weak  or  entirely  wanting,  and 
it  promises  industrial  symmetry  and  self- 
sufficiency,  which  He  at  the  base  of  the  pro- 
tectionist philosophy.  Thus  it  would  tend  to 
meet  the  claims  of  the  most  modem  phase  of 
protectionism,  for  it  looks  to  the  advancement 
of  both  labor  and  capital — not  alone  through 
their  mutual  dependency,  but  by  rendering 
a  distinct  service  to  each  separately.     It  serves 


304  SAVINGS    INSTITUTIONS 

labor  by  directing  it  to  the  attainment  of  a 
higher  power  in  competition  for  wage  service, 
and  it  serves  capital  by  supplying  an  available 
loan  fund  for  the  assembling  and  equipment 
of  productive  enterprises. 

It  is  further  said  in  favor  of  a  state  savings 
system  that  it  serves  as  a  financial  resource  to 
the  state  and  as  a  buttress  to  its  credit ;  for  it 
has  in  its  own  hands  a  market  for  the  whole 
or  a  part  of  an  issue  of  bonds.  The  competi- 
tion of  private  investment  must  be  the  keener 
because  of  the  power  of  the  state  to  take  up 
a  large  part  of  the  bonds  which  would  other- 
wise be  thrown  upon  the  market ;  the  unsat- 
isfied demand  tending  to  raise  the  price. 

But  this  line  of  argument  is  unsound. 
If  the  state  enters  into  the  savings  bank  busi- 
ness it  must  have  an  eye  single  to  the  cultiva- 
tion of  saving ;  for  an  institution  managed  in 
the  fiscal  interest  of  the  government  would 
be  no  more  a  proper  savings  bank  than  are  the 
interest  paying  banks  which  are  conducted  in 
the  interest  of  private  persons.     The  savings 


POSTAL  SAVINGS  BANKS  305 

principle  is  wanting  in  either  case.  The  gov- 
ernment undertakes  the  work  of  handUng 
savings  deposits  as  a  trnst  in  the  interest  of 
depositors  and  for  the  purpose  of  encouraging 
the  saving  habit,  and,  therefore,  it  may  not 
appropriate  the  funds  left  in  its  keeping  for 
its  own  profit.  Before  it  does  the  thing  which 
a  private  trustee  could  not  do  legally,  viz :  bor- 
row the  money  left  in  trust  with  it — it  must 
appear  that  such  a  use  will  be  for  the  best  in- 
terest of  the  depositors  and  for  the  best  in- 
terest of  general  culture  in  saving. 

The  change  from  private  control  to  the  con- 
trol of  the  municipality  occurred  first  in  Ger- 
many. That  the  Germans  did  not  take  the 
next  and  final  step  may  be  explained  by  the 
fact  that  they  have  been  slow  in  developing  a 
consciousness  of  the  state,  their  highly  inteUi- 
gent  public  spirit  being  local  rather  than  na- 
tional. So  the  postal  savings  bank  did  not 
evolve  immediately  out  of  the  municipal  sys- 
tem, for  in  England,  its  birthplace,  there  has 
never  been  a  municipal  system.     Here,  prior 


306  SAVINGS    INSTITUTIONS 

to  the  introduction  of  postal  savings,  private 
philanthropy — acting  under  a  measure  of  state 
control,  provided  all  the  savings  facihties. 

The  post-office  affords  the  most  ready  means 
from  the  political  point  of  view  of  realizing 
a  state  savings  bank.  A  state  savings  bank 
movement  must  always  reckon  with  the  oppo- 
sition of  extreme  advocates  of  laissez  faire ; 
and  the  post-office  does  the  least  violence  to 
this  doctrine  because  it  requires  no  new  organ 
of  government.  The  most  it  does  is  to  extend 
and  perhaps  make  somewhat  more  cumber- 
some an  established  organ  of  the  state.  It  is 
also  well  calculated  to  disarm  the  critics  of 
schemes  which  tend  to  increase  the  list  of  civil 
servants,  for  the  additional  servants  required 
would  be  out  of  the  sight  of  the  public — 
located  in  the  larger  offices  and  in  the  central 
office.  In  the  offices  to  which  the  people  most 
resort  the  old  force  is  usually  able  to  take 
care  of  all  the  new  business. ' 

^  Two  offices  lately  visited  by  the  writer  well  illustrate  this 
fact.     The  one  was  a  branch  office  in  the  city  of  Newcastle- 


POSTAL  SAVINGS   BANKS  307 

It  appeals  also  to  the  approval  of  politicians 
from  the  standpoint  of  the  practical  econo- 
mies. In  this  regard,  the  post-office  has  a 
most  pronounced  and  unquestionable  advant- 
age over  any  other  scheme  of  state  savings. 
The  postal  savings  department  might  be  classed 
as  parasitic,  in  that  it  attaches  itself  to  an 
existing  organ  of  the  body  politic  and  vitalizes 
itself  chiefly  from  the  nourishment  already 
provided  for  that  organ.  The  state  in  stand- 
ing sponsor  for  this  phase  of  popular  educa- 
tion will  seek  to  make  it  self-supporting,  and 
this  aim  could  not  be  accomplished  through 
the  use  of  a  new  and  separate  department 
without  restricting  its  application  to  the  popu- 
lous centres.  In  order  to  make  it  available  to 
all  sections  the  authorities  must  utilize  the 
surplus  energies  of   existing  machinery.     In 

on-Tyne,  which  was  at  once  a  post-office,  a  telegraph  office, 
an  insurance  office,  and  a  savings  bank,  and  the  work  of  all  these 
departments  was  so  far  simplified  that  one  young  woman  was 
able  to  take  care  of  it.  The  other  was  a  small  village  in  the 
north  of  Ireland,  where,  in  addition  to  performing  the  duties 
just  enumerated,  the  postmaster  kept  the  principal  village 
, shop. 


308  SAVINGS    INSTITUTIONS 

some  cases  this  machinery  is  not  restricted  to 
the  post-office  department,  but  includes  other 
agencies,  as  the  ticket  sellers  on  lines  of  state 
railways,  offices  of  the  state  treasury,  and  in 
some  instances  even  Justices  of  the  Peace. 
In  many  instances  the  capacity  of  such  func- 
tionaries is  not  all  utilized  by  the  public  ser- 
vice, and  the  public  might  exact  the  additional 
service  at  the  old  rate  of  compensation. 

In  many  other  cases  the  public  official  em- 
ploys the  energies  not  required  of  him  by  the 
government  in  the  pursuit  of  a  private  busi- 
ness, and  such  division  of  energies  between 
public  and  private  employment  generally  re- 
sults in  the  neglect  of  the  former.  The  best 
energies  are  almost  certain  to  be  directed  to 
that  class  of  work  in  which  emolument  is 
most  definitely  and  immediately  related  to 
effort,  which  fact  renders  the  union  of  public 
and  private  service  a  mesalliance  from  the 
view  point  of  the  service.  Hence  there  must  be 
a  distinct  gain  to  the  public  service  when  a  ser- 
vant can  be  given  two  public  functions  to  per- 


POSTAL   SAVINGS   BANKS  309 

form  to  save  him  from  the  necessity  of  giving 
part  of  his  time  to  private  employment,  and 
the  postmaster  and  savings  bank  director  will 
prove  a  better  postmaster  than  the  postmaster 
and  village  merchant. 

In  some  instances  the  savings  bank  might 
serve  as  a  means  of  extending  the  postal  ser- 
vice without  incurring  any  additional  financial 
burden.  For  instance  in  the  matter  of  ex- 
tending the  free  delivery  system  to  the  smaller 
towns,  and  to  rural  communities  of  a  certain 
density  of  population,  the  extra  burden  might 
be  borne  by  the  savings  bank.  In  return  for 
the  gratuitous  service  in  the  central  office  the 
bank  might  bear  all  the  expense  of  messen- 
gers charged  with  the  double  duty  of  collect- 
ing and  distributing  mail,  and  of  collecting 
and  paying  out  money  for  the  savings  bank. 
In  some  instances  the  Department  might  be 
enabled  to  place  an  agent,  both  for  the  letter 
post  and  the  savings  bank,  in  communities 
which  could  not  support  an  agent  for  the  post 
alone. 


310  SAVINGS   INSTITUTIONS 

Valid,  if  not  conclusive,  arguments  may  be 
advanced  opposed  to  postal  savings.  Some  of 
the  evils  usually  resulting  to  the  host  to  which 
the  parasite  is  attached  may  be  experienced 
by  the  post-office  department;  the  vitalizing 
substance  absorbed  by  the  incubus  may  result 
in  a  degree  of  deterioration  to  the  organ  for 
which  it  was  originally  designed. 

The  contrary  view  cannot  be  supported  by  the 
fact  that  no  deterioration  in  the  service  has 
resulted  from  the  addition  of  the  telegraph  to 
the  postal  service.  There  is  a  natural  affinity 
between  the  telegraph  and  the  letter  post,  both 
having  for  their  main  office  the  transmission  of 
intelligence — the  only  difference  being  in  the 
media,  the  one  utilizing  the  wire  and  the  other 
the  slower  railway  train  or  the  still  slower 
stage  coach.  Exchanges  of  intelligence  be- 
tween persons  situated  beyond  the  reach  of 
personal  communication  may  be  logically 
divided  into  two  classes,  viz. ,  communications 
of  news,  and  communications  of  sentiment 
and  opinions.     The  one  class  is  concise  in  form 


POSTAL  SAVINGS   BANKS  311 

and  likely  to  be  urgent  in  character,  and 
naturally  falls  to  the  postal  telegraph  service. 
The  other  is  voluminous  in  form  and  usually 
does  not  require  immediate  transmission,  and 
as  naturally  falls  to  the  postal  letter  service. 
By  commanding  both  of  these  services  the 
postal  department  may  possibly  even  improve 
the  general  service  by  making  them  mutually 
complementary. 

Neither  is  the  objection  answered  by  show- 
ing that  the  addition  of  the  functions  of  an 
express  business,  in  the  form  of  a  parcel  post, 
does  not  result  in  a  deterioration  in  the  regu- 
lar postal  service,  for  there  is  a  close  affinity 
between  the  letter  post  and  the  parcel  post. 
There  are  in  fact  no  violent  breaks  in  the  fol- 
lowing classes  of  matter :  postal  cards,  letters, 
newspapers,  magazines,  books,  and  parcels  of 
merchandise.  The  same  principles  of  ser- 
vice apply  to  each  of  these,  as  methods  of  col- 
lection and  distribution,  tariff  according  to 
zones  of  weight,  and  payment  by  purchase  of 
stamps. 


312  SAVINGS    INSTITUTIONS 

In  the  matter  of  transmission  also  this 
Tinion  of  service  offers  no  intricate  com- 
plexities. A  mail  service  of  one  of  the 
European  countries  might  be  generally  classi- 
fied according  to  the  arrangements  for  trans- 
mission, in  which  the  Department  owns  the 
medium,  as  in  the  case  of  the  telegraph  ser- 
vice, or  it  arranges  with  another  Department 
of  the  government,  or  contracts  with  a  private 
corporation  for  transmission,  as  in  the  case  of 
the  rest  of  the  service.  The  same  kind  of 
skill  which  can  arrange,  or  contract,  for  the 
conveyance  of  leather  bags  filled  with  letters 
and  papers  can  with  equal  facility  arrange  or 
contract  for  the  conveyance  of  leather  bags 
filled  with  books  or  parcels. 

Even  the  success  of  the  post-office  in  the 
conduct  of  a  money  order  business  is  not  as 
potent  an  answer  to  the  criticism  here  under 
consideration  as  may  at  first  appear.  To  be 
sure  it  is  essentially  the  same  as  the  money 
order  business  of  a  bank ;  but  it  should  be  added 
that  this  is  only  a  minor  banking  function, 


POSTAL  SAVINGS  BANKS  313 

reducible  to  the  routine  of  a  merely  clerical 
service.  Differing  from  other  commodities, 
money  admits  of  great  economy  of  transmis- 
sion, by  the  system  of  accounting  between 
branch  offices  and  the  central  office,  or  be- 
tween different  offices,  and  the  transmission 
of  balances  instead  of  the  individual  amounts 
directed  to  be  sent.  This  principle  applies  alike 
to  banking  arrangements,  to  systems  of  express 
agencies,  to  a  post-office  system,  and  to  a 
federation  of  post-office  systems.  Such  an 
accounting  between  offices  or  between  a  cen- 
tral office  and  the  different  branches  is  usually 
incidental  to  large  industrial  or  administrative 
organizations. 

If  the  savings  bank  exists  in  germ  in  the 
post-office,  it  is  in  the  money  order  depart- 
ment. Through  the  exercise  of  this  function 
the  officials  have  become  famihar  with  the 
receipt  and  custody  of  money,  but  the  step 
from  this  to  administering  the  funds  left  on 
deposit  is  very  much  more  radical  than  any 
hitherto  taken  in  the  process  of  the  extension 


314  SA.VINGS  INSTITUTIONS 

of  the  utilities  of  the  postal  service.  The 
system  in  its  development  up  to  this  point 
consists  in  organizing  and  directing  an  army 
of  clerks  and  agents,  in  classifying  the  husi- 
ness,  and  in  such  incidental  offices  as  keeping 
up  repairs  on  the  department's  property,  as 
wires,  buildings,  etc. ,  and  in  making  contracts 
with  railroad  and  stage  coach  lines. 

The  administration  of  funds  is  not  even  dis- 
tantly related  in  character  to  any  of  these 
duties.  A  special  talent  is  here  required  and 
a  talent  more  likely  to  be  found  in  the  Treas- 
ury Department  than  in  the  Post-Office  De- 
partment. An  expert  knowledge  of  securities 
is  called  for ;  and  if  it  is  the  policy  to  limit  in- 
vestment of  funds  to  public  securities  the 
directory  must  keep  advised  as  to  the  relative 
value  of  the  different  classes  of  pubhc  securi- 
ties. If  it  is  the  policy  to  limit  them  to  a 
single  class  of  public  securities,  as  national 
bonds,  the  directory  must  be  advised  as  to  the 
precise  nature  of  the  fluctuating  tendencies  of 
securities  of  this  class,  in  order  that  the  inter- 


POSTAL  SAVINGS  BANKS  315 

ests  of  depositors  may  be  served  in  making 
purchases  and  sales  at  the  right  time. 

This  difficulty  might  be  met  by  dividing  the 
work  betv^een  the  post-office  and  the  Treasury 
Departments,  giving  to  the  former  the  work 
of  collections  and  payments  and  charging  the 
latter  with  the  duty  of  administering  the 
funds,  were  it  not  for  the  cumbersomeness  of 
such  an  inter-relation  of  departments,  and  for 
the  undesirableness  of  making  one  depart- 
ment, to  so  large  an  extent,  a  mere  agent  for 
another.  The  difficulties  are  mitigated  by 
giving  a  large  discretion  to  the  district  bureau, 
but  stiU  the  head  of  the  Department  must 
keep  advised  of  the  general  workings  of  this 
new  branch  of  the  service.  The  extra  work 
imposed  upon  the  branch  offices  is  clerical 
and  reducible  to  a  mechanical  routine,  but  the 
comphcated  duties  imposed  upon  the  head 
constitute  a  strong  objection  to  the  system. 
Every  extension  of  public  activity,  includ- 
ing these  additions  to  the  regular  postal  ser- 
vice, are  justly  objectionable  as  leading  in  the 


316  SAVINGS    INSTITUTIONS 

direction  of  an  enlargment  of  the  sphere  of 
the  state  which  may  ultimately  impinge  upon 
the  salutary  play  of  economic  laws.  Every 
addition  to  pablic  functions  which  seems  to 
be  in  the  interest  of  the  people  as  a  whole  is 
pointed  to  as  an  argument  for  further  en- 
croachment upon  the  sphere  of  private  initia- 
tive. The  collectivist  points  to  the  state 
school,  the  post-office,  the  highways,  the  state 
railways  and  telegraphs,  etc.,  as  evidences  of 
the  wisdom  of  collectivism.  In  view  of  the 
possible  dangers  from  too  great  an  extension 
of  public  functions,  the  political  conservatism, 
which  is  always  likely  to  oppose  itself  to  any 
new  departure  in  this  direction,  while  often 
contrary  to  a  wise  public  policy,  may  be,  on 
the  whole,  counted  as  a  wholesome  force.  The 
advantage  of  public  over  private  activity 
should  be  very  evident  to  warrant  a  change  in 
policy  in  the  direction  of  more  state  control. 
Between  suffering  from  too  conservative  and 
too  "radical  a  policy  the  latter  evil  is  much  the 
more  to  be  deplored. 


POSTAL   SAVINGS  BANKS  317 

The  fascinations  of  a  postal  savings  scheme 
are  so  irresistible  that  those  who  have  essayed 
to  treat  the  subject  seem  invariably  to  have 
been  betrayed  into  using  the  arts  of  the  agita- 
tor. This  is  particularly  noticeable  in  the  effort 
to  allay  hostility  on  the  part  of  the  banking 
fraternity.  We  are  told  time  aud  again  that 
it  appeals  to  a  distinct  constituency,  which  it 
is  not  profitable  for  the  banks  to  cultivate.  A 
recent  article  suggests,  in  connection  with  the 
extension  of  the  check  system  in  Austria,  that 
it  promises  to  relieve  the  banks  of  the  ' '  small 
accounts",  as  if  the  banks  would  be  bene- 
fited. And  Dr.  Shaw  has  given  currency  to 
the  idea  that  in  the  investment  of  the  funds 
of  the  savings  banks  it  has  been  found  expedi- 
ent to  limit  them  to  public  securities.  In 
speaking  of  the  municipal  system  of  Ger- 
many, he  says :  ' '  Their  funds  are  invested,  as 
a  rule,  in  imperial,  national,  or  municipal  in- 
terest-bearing securities."^  Dr.  Shaw  evi- 
dently did  not  secure  his  information  from  pri- 

^  "Municipal  Government  in  Europe,"  p.  372. 


318  SAVINGS    INSTITUTIONS 

niary  sources,  for  in  Saxony,  where  the  sav- 
ings banks  have  gone  further  toward  reaching 
the  people  than  in  any  of  the  greater  states  of 
the  empire,  the  report  for  1893  shows  that 
339,839,299  marks  of  savings  deposits  were 
invested  in  real  estate  mortgage  securities 
against  only  10,557,341  marks  in  public  securi- 
ties. Of  the  rest  of  the  funds,  5,850,614 
marks  were  lent  on  chattels,  and  2,552,376 
marks  on  notes  with  personal  endorsements.  ^ 

In  Prussia  also  real  estate  mortgages  are 
the  most  popular  class  of  securities.  In  1893, 
there  were  2,215,011,717  marks  invested  in 
real  estate  security  against  only  1,138,028,196 
in  public  securities.  The  mortages  were  nearly 
evenly  divided  l)etween  city  and  country  prop- 
erty. Out  of  the  rest  of  the  savings  funds  in 
Prussia,  147,278,935  marks  were  invested  in 
ordinary  commercial  paper.  - 

But.the  enthusiasm  which  pervades  the  di- 

^  Zktscltrift  des  Koniglich  SarJisischen  StatistiscMn  Bureaus, 
for  189^,  p.  40. 

*  Sit(i^Jjtiitsc?inft  des  Koniglich  Preusiaschen  Statiatischeii 
BureavH.  for  1895,  p.  119. 


POSTAL   SAVINGS   BANKS  319 

rectories  of  postal  savings  banks  evidences  the 
whole-hearted  service  which  they  have  secured 
and  deserves  mention  as  one  explanation  of 
their  remarkable  success.  Here  we  are  not 
surprised  to  find  the  critical  spirit  absent.  In 
the  writer's  interviews  with  officials  in  the 
state  systems  he  has  always  been  assured  that 
there  was  no  conflict  of  interest  between  the 
state  savings  bank  and  the  ordinary  commer- 
cial banks.  A  fair  sample  of  such  opinions  is 
that  of  the  Director- General  of  the  French 
Posts  and  Telegraph: 

"  As  regards  the  private  banks  "  he  wrote 
to  Mr.  Wanamaker,  "  they  have  nothing  to 
fear  from  the  postal  savings  bank,  which  re- 
ceives deposits  from  one  franc  upwards,  and 
even  deposits  less  than  one  franc,  which  the 
depositor  pastes  on  a  card  and  which  are  ac- 
cepted when  their  value  has  reached  one  franc. 
The  operation  of  postal  savings  banks  relates 
principally  to  small  accounts;  and  experience 
has  shown  that  the  postal  savings  bank  does 
not  in  the  least  interfere  with  the  development 
of  the  private  banks  which  receive  larger  de- 
posits. The  vast  majority  of  the  depositors  in 
the  postal  savings  bank  consists  of  miners, 
laborers,  clerks,  etc.,  whilst  the  private  banks 
have  their  depositors  among  persons  of  greater 
means. ' ' 


320  SAVINGS    INSTITUTIONS 

This  is  a  view,  however,  which  has  not  been 
supported  by  evidence,  so  far  as  commercial 
banks  are  concerned,  and  the  author  doubts  if 
it  can  stand  as  a  sound  prophecy  as  to  devel- 
opments in  the  future.  It  is  probably  based 
upon  the  theory  of  the  savings  banks  as  a 
preparatory  school  for  the  commercial  banks ; 
the  depositor,  after  passing  a  certain  stage  of 
development,  finding  it  to  his  advantage  to 
become  a  patron  of  the  commercial  bank.  But 
this  theory  assumes  an  incapacity  on  the  part 
of  the  savings  bank  to  respond  to  the  demands 
of  the  small  capitalist  which  does  not  exist. 

Such  an  inherent  incapacity  seems  to  be 
negatived  by  the  statutory  Umitations  which 
have  been  placed  upon  the  uses  of  the  savings 
banks  in  all  the  history  of  their  development. 
In  Wurtermburg,  only  certain  classes  of  per- 
sons are  permitted  to  become  patrons,  and 
nearly  all  are  limited  in  the  amount  of 
single  deposits,  and  in  the  size  of  accounts 
allowed  to  a  single  depositor,  for  the  pro- 
tection  of  commercial   banks;  at   least   such 


POSTAL  SAVINGS  BANKS  321 

restrictions  are  hostile  to  the  encourage- 
ment of  savings.  Much  more  consistent  is 
the  pohcy  of  the  postal  banks  of  Belgium  and 
of  Italy,  which  fix  no  maximum  for  deposit 
accounts  but  discriminate  in  favor  of  the  small 
depositor  by  gradations  in  the  rate  of  interest. 

The  large  increase  of  patronage  which  fol- 
lows upon  every  new  opportunity  offered  to 
the  larger  depositor  seem  to  indicate  that  the 
institution  may  appeal  to  a  larger  constituency 
than  the  French  Director  and  Mr.  Wanamaker 
are  willing  to  admit. 

For  example,  in  England  prior  to  1893  one 
person  could  not  deposit  within  a  year  a  greater 
amount  than  thirty  pounds  sterHng,  an  indi- 
vidual account  could  never  exceed  £200  ster- 
ling, purchases  of  government  stock  for  one 
person  could  not  exceed  £100  within  a  year, 
and  the  total  purchases  of  stock  for  one  per- 
son by  the  postal  authorities  could  not  exceed 
£300.  An  increase  of  these  maxims  was  one 
of  the  achievements  of  the  Rosebery  govern- 
ment, and  the  law  of  December  21st,  1893, 


322  SAVINGS    INSTITUTIONS 

raised  the  maxim  as  follows :  Of  the  amount 
which  might  be  deposited  within  a  year  to 
£50 ;  of  the  amount  which  might  be  invested 
in  government  stock  within  a  year  to  £200 ; 
and  of  the  total  amount  of  such  purchases  to 
£500.  These  larger  opportunities  were  fol- 
lowed by  an  enormous  increase  of  patronage. 
In  the  year  following  there  was  an  increase  in 
the  number  of  deposit  accounts  of  524,000 — 
nearly  double  the  increase  of  the  year  preced- 
ing, and  the  grand  total  of  deposits  was  in- 
creased by  more  than  £8,500,000, 

Neither  does  experience  show  that  the  aim 
is  always  realized  in  the  matter  of  the  coveted 
patronage.  After  the  first  four  years  of  the 
operation  of  the  Austrian  postal  savings  bank, 
the  patronage  ranked  in  numerical  order,  as 
follows:  first,  the  student  and  scholar  class; 
second,  the  propertied  class,  as  merchants, 
manufacturers,  land  owners,  etc, ;  third,  the 
wage-earning  class. 

Another  safeguard  favorable  to  commercial 
banks  is  found  in  the  obstructions  opposed  to 


POSTAL   SAVINGS   BANKS  323 

free  withdrawals — as  requirements  of  notice 
of  withdrawals  beyond  certain  amounts. 
Such  restrictions  are,  under  existing  devices, 
made  necessary  by  the  policy  of  a  low  reserve, 
a  policy  essential  to  a  high  interest  rate;  and 
its  abandonment  would  be  a  decided  departure 
from  the  character  of  a  savings  institution, 
unless  some  new  device  could  be  introduced 
for  the  protection  of  the  interest  rate. 

Austria  has  departed  from  traditional  meth- 
ods in  so  far  as  to  add  what  may  properly 
be  called  a  commercial  department  to  her 
postal  savings  system.  Without  abandoning 
her  savings  bank,  with  its  usual  restrictions, 
she  has  added  a  department  in  which  freedom 
enough  is  allowed  to  meet  the  needs  of  the 
average  business  man,  in  that,  although  at  the 
cost  of  a  lower  rate  of  interest,  withdrawals 
may  be  made  by  check.  At  the  close  of  1895 
there  were  1,110,000  deposit  accounts  in  the 
regular  savings  department  against  28,000  in 
the  check  department.  But  in  volume  of 
business  the  advantage  is  very  much  with  the 


324  SAVINGS    INSTITUTIONS 

check  department.  The  report  for  1895  shows 
a  turnover  of  2,970,000,000  florins  and  13,- 
740,000  transactions  in  the  check  department 
against  a  turnover  of  68,000,000  florins  and 
2,595,000  transactions  in  the  savings  depart- 
ment. 

The  check  department  also  shows  every  sign 
of  growth.  The  annual  number  of  transac- 
tions increased  from  269,000  in  1887  to  more 
than  ten  and  a  half  millions  in  1893,  and  to 
nearly  fourteen  millions  in  1895.  The  number 
of  accounts  also  shows  a  steady  increase.  Of 
the  twenty-five  thousand  in  1893  seven  thous- 
and were  in  Vienna,  and  the  next  largest 
number  were  in  Prague — which  ranks  second 
in  commercial  importance.  This  certainly 
shows  a  tendency  to  encroach  upon  the  terri- 
tory of  the  commercial  banks. 

It  may  properly  be  objected  to  this  showing 
that  the  check  department  is  not  strictly  a 
savings  institution — that  it  only  reaches  out 
after  the  commercial  business  by  sacrificing 
a  part  of  the  motive  to  save.     But  what  could 


POSTAL   SAVINGS   BANKS  325 

be  said  of  its  commercial  possibilities  if  the 
whole  savings  institution  could  be  supplied 
with  the  same  commercial  facilities,  could 
offer  the  same  freedom  of  withdrawal  to  de- 
positors, could  fully  incorporate  the  checking 
principle  without  sacrificing  the  earning  power 
of  the  deposits  ?  This  could  not  be  accom- 
plished by  any  private  system  or  by  any  muni- 
cipal system  of  savings.  ThSse  systems  must 
protect  themselves  against  runs,  either  by 
restrictions  upon  the  right  of  withdrawal  or 
by  a  sufficient  reserve — the  depositor's  free- 
dom of  action  with  respect  to  his  deposits 
must  be  bought  at  the  expense  of  a  portion  of 
the  earning  capacity  of  his  money.  But  it 
would  seem  possible  for  the  state  to  afford  the 
larger  liberty  without  the  penalty  of  a  reserve 
of  idle  and  sterile  money ;  indeed  it  seems  to 
be  within  its  power  to  eliminate  the  reserve 
entirely  and  to  keep  all  the  deposits  invested. 
This  was  the  purpose  of  the  feature  of  the  bill 
for  a  post-office  savings  bank  presented  by 
Senator  Allen,  of   Nebraska,  which  provided 


326  SAVINGS    INSTITUTIONS 

for  the  investment  of  the  net  deposits  for  each 
day  in  interest-bearing  securities  and  author- 
ized the  payment  of  withdrawals,  when 
necessary,  in  postal  notes, — to  be  cancelled 
when  received  at  the  Treasury. 

What  seems  to  be  a  fatal  objection  to  the 
Allen  plan  is  the  effect  which  it  might  have 
upon  the  volume  of  the  currency,  for  these 
notes  would  need  to  have  the  legal  tender 
power,  and  an  uncertain  quantity  of  them 
would  never  find  their  way  into  the  Treasury. 
This  difficulty  could  be  avoided  by  authorizing 
the  issue  of  certificates  of  standard  money,  as 
gold  certificates,  for  this  purpose.  According 
to  this  plan  a  local  bank  would  at  the  close  of 
each  day  forward  all  the  net  receipts  to  head- 
quarters for  investment.  On  the  day  follow- 
ing withdrawals  would  be  paid  out  of  deposits 
as  far  as  possible, — but  this  would  not  always 
be  possible,  as  where  the  first  customer  had 
come  to  withdraw — there  would  be  nothing  in 
the  till.  In  such  case  he  would  be  paid  with 
certificates    in    the   denominations    required. 


POSTAL   SAVINGS   BANKS  327 

At  the  close  of  the  day  the  Treasury  Depart- 
ment would  be  advised  by  wire  as  to  the  num- 
ber of  certificates  issued  from  each  office,  and 
an  equivalent  amount  of  certificates  would  be 
cancelled,  leaving  the  quantity  of  currency  in 
circulation  practically  undisturbed. 

Such  a  plan  might  react  to  the  detriment  of 
the  savings  principle,  if  it  should  attract  a 
large  volume  of  commercial  deposits,  by  ap- 
preciating the  investment  securities — render- 
ing the  interest  rate  lower.  This  would  un- 
doubtedly be  the  case  unless  preventive  meas- 
ures were  taken.  One  way  of  meeting  the 
difficulty  would  be  to  place  no  limit  to  a 
deposit  account  but  to  fix  the  interest-bearing 
amount  at  near  the  upper  hmit  of  accounts 
falling  to  the  working  class.  The  earnings  of 
the  excess  in  the  commercial  accounts  would 
thus  add  to  the  yield  of  the  industrial  account 
and  perhaps  more  than  offset  the  appreciation 
of  securities. 

The  element  of  unrestricted  withdrawals 
would  not  only  be  attractive  to  the  business 


328  SAVINGS    INSTITUTIONS 

community  but  would  prove  very  attractive 
to  the  wage-earning  class  as  well.  All  classes 
would  feel  much  more  inclined  to  leave  their 
money  where  they  could  feel  perfectly  sure 
that  they  might  have  it  back  at  any  time  their 
convenience  or  an  emergency  might  require. 

If  such  a  plan  should  prove  practical  the 
question,  in  the  light  of  the  Austrian  experi- 
ence, would  be,  not  whether  the  savings  bank 
would  share  in  the  business  now  enjoyed  by 
the  commercial  banks,  but  how  much  of  this 
business  it  would  take.  Such  a  scheme  in 
action  might  create  far-reaching  and  radical 
institutional  and  economic  changes. 

There  seems  to  be  no  ground  for  the  assump- 
tion that  savings  banks  naturally  appeal  to  an 
entirely  different  constituency  from  that  of 
commercial  banks,  and  it  may  be  safe  to  con- 
clude that  both  facts  of  experience  and  a  com- 
mon-sense view  of  the  situation  support  a 
contrary  theory — that  the  more  the  savings 
banks  are  equipped  to  secure  the  best  results 
in  promoting  saving,  the  more  they  will  be 


POSTAL  SAVINGS   BANKS  329 

calculated  to  invade  the  territory  now  occupied 
by  commercial  banks.  The  extent  of  this 
invasion  can  only  be  a  subject  for  conjecture. 
Without  recognizing  this  conflict  of  inter- 
ests even  the  political  aspects  of  the  question 
cannot  be  intelligently  considered,  for  it  is 
scarcely  probable  that  the  economic  possibih- 
ties  here  suggested  will  not  play  a  considerable 
part  in  the  legislation  on  the  subject  when  the 
point  is  reached.  ^ 

^A  more  extended  discussion  of  the  conflicting  interests  of 
savings  banks  and  commercial  banks  is  contained  in  an  article 
by  the  author  in  the  Annals  of  the  American  Academy  of 
Political  and  Social  Science  for  January,  1896,  under  the  cap- 
tion: "  The  Relation  of  Postal  Savings  Banks  to  Commercial 
Banks". 


CHAPTER  X 

POSTAL  SAVINGS  IN  ENGLAND 

Savings  banks  first  became  objects  of  legis- 
lative control  in  Great  Britain,  and  it  was  here 
also  that  the  scheme  of  a  postal  savings  bank 
was  first  brought  to  the  attention  of  the  state 
government,  and  here  that  the  idea  first  crys- 
tallized into  statute  law. 

This  tendency  in  England  may  seem  re- 
markable in  the  fight  of  the  fact  that  it  was 
contemporaneous  with  the  development  into 
a  controlling  power  of  the  doctrine  of  unham- 
pered individual  enterprise,  as  the  condition 
essential  to  national  prosperity.  It  was  a  time 
when  state  activities  were  disparaged  both  by 
economic  writers  and  by  statesmen ;  the  reac- 
tion against  the  restrictions  and  interferences 
of  the  state  in  industry,  which  had  gradually 
grown  into  the  practice  of  nations  and  which 
found  its  theoretical  jurisdiction  in  the  teach- 

(330) 


POSTAL  SAVINGS  IN  ENGLAND      331 

ings  of  the  Mercantilists,  marked  the  trend  of 
the  most  enhghtened  thought ;  the  writings  of 
Adam  Smith,  of  Malthus  and  of  Ricardo  were 
crystallizing  into  a  set  of  orthodox  poHtical 
formulae  which  were  in  all  points  the  antithesis 
of  state  activity  and  of  state  interference. 
It  may  seem  more  remarkable  in  the  hght  of 
the  fact  that  the  scheme  for  state  savings  in- 
stitutions in  the  interest  of  the  poorer  classes 
was  gaining  in  popular  favor  at  the  very  time 
when  the  opposition  to  poor  laws  set  on  foot 
by  Malthus 's  essay  on  Population,  was  gather- 
ing strength.  And  it  will  be  recalled  that  this 
opposition  was  almost  entirely  destructive.  It 
attacked  not  only  the  scheme  in  vogue  for 
reUeving  the  distress  of  the  poor,  but  opposed 
also  the  general  principle  of  poor  relief.  The 
discipline  of  personal  experience  was  regarded 
as  the  normal  corrective  of  labor  problems. 

The  explanation  of  the  anomaly  must  be 
found  in  the  fact  of  the  industrial  revolution. 
The  country  which  was  the  leader  and  the 
storm  center  of  this  great  movement  would 


332  SAVINGS    INSTITUTIONS 

be  also  the  logical  leader  in  the  adoption  of 
such  a  palliative  as  the  state  savings  bank. 
The  conditions  created  by  the  rapid  growth  of 
inventions,  which  so  far  intensified  the  pro- 
ductive power  of  industry  as  to  remove  the 
consumer  from  the  sight  and  knowledge  of  the 
producer,  and  to  render  the  relation  between 
demand  and  supply  an  indefinite  and  indeter- 
minable quantity,  were  well  calculated  to  con- 
found the  classical  economists.  The  suffer- 
ings forced  upon  an  unprepared  laboring  class 
were  too  general  and  too  poignant  not  to  com  - 
maud  the  attention  of  philanthropists  and 
statesmen,  and  political  and  economic  doc- 
trines had  to  yield  in  some  points  before  stern 
conditions. 

Strange  as  it  may  at  first  seem,  the  project 
impinged  but  slightly  upon  the  individualism  of 
the  times ;  for  while  it  was  designed  to  do  away 
with  it  in  the  line  of  savings  bank  enterprise,  it 
was  calculated  at  the  same  time  to  equip  a 
stronger  and  a  more  aggressive  individualism  in 
all  other  lines.    And  it  should  be  noted  that  the 


POSTAL   SAVINGS  IN  ENGLAND  333 

English  thought  in  practical  matters  has  been 
more  discriminating  than  American  in  its 
attitude  towards  individual  enterprise.  There 
is  now  a  more  complete  separation  of  compe- 
tition into  a  sphere  of  its  own  in  England;  and 
within  this  sphere  according  to  the  prevailing 
opinion,  paternalism,  whether  applied  to  capi- 
tal, in  the  form  of  subsidies,  bounties,  dis- 
criminating tariffs,  or  in  any  form  of  state 
favoritism,  or  to  labor,  in  the  form  of  partial 
or  periodical  support,  is  vicious.  Capital  must 
look  to  profits  alone,  and  profits  won  in  the 
open  field  of  competition;  and  labor  must 
look  to  wages  alone,  and  to  wages  also  secured 
in  the  field  of  free  competition.  But  certain 
agencies  which  aid  and  facilitate  competition 
within  its  sphere  are  not  regarded  as  necessa- 
rily subjects  of  private  enterprise.  For  ex- 
ample, from  the  side  of  capital  the  telegraph 
is  added  to  the  post  without  being  regarded  as 
inconsistent  with  the  doctrine  of  free  trade. 
Such  an  instrument  might  appear  to  be  a 
general  subsidy  to  capital — the   government 


334  SAVINGS    INSTITUTIONS 

giving  the  profits  which  would  otherwise  have 
to  be  paid  on  the  transmission  of  messages ; 
but  it  is  an  impartial  service,  and  may  react 
to  the  advantage  of  the  whole  people.  And 
from  the  side  of  labor,  certain  measures  for 
the  melioration  of  its  general  condition  arouse 
no  hostility  from  individualist  doctrinaires — 
save  of  the  extremest  type.  In  the  munici- 
pal tenement  house  the  municipality  renders 
a  service  to  labor  similar  to  that  which  the 
state  renders  to  capital  in  the  post  and  the 
telegraph.  The  municipality  gives  the  land- 
lord's profit,  or  rent,  to  the  wage -earning 
class.  The  renting  of  houses  is  not  regarded 
as  necessarily  within  the  sphere  of  free  com- 
petition. The  movement  seeks  the  advantage 
of  labor  as  a  class,  and  this  policy  promises  to 
react  upon  society  as  a  whole.  And  the  same 
principle  applies  to  the  case  of  the  state  and 
municipal  pawnshops,  and  to  the  case  of  the 
state  provisions  for  workingmen's  insurance. 
The  state  or  the  city  here  subsidizes  labor  as  a 
whole  by  offering  services  and  security  with- 


POSTAL  SAVINGS   IN   ENGLAND  335 

out  any  charge  for  profits.  The  insurance 
business  and  the  business  of  loaning  money 
on  pledge  are  not  regarded  as  necessarily  with- 
in the  sphere  of  free  competition. 

There  is  no  room  for  the  savings  bank  in 
the  sphere  of  free  competition ;  and  the  issue  is 
not  between  state  activity  and  free  competi- 
tion, but  between  private  philanthropy  and 
pubhc  philanthropy. 

The  conduct  of  this  species  of  philanthropy 
by  private  associations  was  very  early  the 
subject  of  criticism ;  incompetent  management 
on  the  part  of  trustees  was  charged  and  the 
result  was  a  proposal  for  a  postal  savings  bank 
as  early  as  the  year  1807.  A  bill  was  in  that 
year  presented  to  the  House  of  Commons  by 
a  Mr.  Whitbread,  "  For  Promoting  and  En- 
couraging Industry  among  the  Laboring 
classes  of  the  Community,  and  the  Relief  and 
Regulation  of  the  Criminal  and  Necessitous 
Poor."i 

^  The  design  of  the  measure  was  the  "establishment  of  one 
great  national  institution  in  the  nature  of  a  bank,  for  the  use 


336  SAVINGS    INSTITUTIONS 

Nothing  came  of  the  proposed  measure  be- 
yond the  creation  of  a  sentiment  in  favor  of 
state  savings,  and  the  giving  to  this  sentiment 
a  well  developed  scheme  to  work  to.  The 
lines  laid  down  in  the  original  proposition  have 
not  been  very  radically  departed  from  in  the 
systems  since  established;  even  the  sugges- 
tions of  state  annuities  and  insurance  as  com- 
plementary to  the  main  idea  have  been  gener- 
ally followed. 

The  evils  complained  of  did  not  abate,  and 
repeated  efforts  were  made  in  the  first  half  of 
the  century  to  revive  Mr.  Whitbread's  project. 

and  the  advantage  of  the  laboring  classes  alone."  To  secure 
the  execution  of  this  purpose,  the  depositors  were  to  be  re- 
quired to  present  certificates  showing  that  they  subsisted  prin- 
cipally or  entirely  upon  the  wages  of  their  labor;  and  the  de- 
posits were  not  to  exceed  £5  at  a  time,  nor  £20  in  one  year, 
nor  £200  in  all;  and  the  funds,  thus  gathered,  were  to  be  in- 
vested in  government  stock  by  the  Poor  Fund.  The  stock 
was  to  be  credited  to  the  depositors  pro  rata,  and  was  to  be 
placed  to  their  credit  when  the  deposit  had  reached  ten  shil- 
lings. The  scheme  was  to  be  put  into  operation  through  the 
agency  of  the  post-office,  and  it  was  to  be  under  the  general 
direction  of  the  Postmaster-General.  The  local  postmasters 
were  to  be  compensated  for  their  services  by  a  fee  of  one 
penny  in  the  pound.  The  scheme  also  included  annuity  and 
insurance  features;  this  department  to  be  under  the  manage- 
ment of  the  Commissioners  of  the  Poor  Fund. 


POSTAL  SAVINGS  IN  ENGLAND  337 

The  indictment  pressed  against  the  trustee 
system  contained  two  counts,  one  alleging 
incompetent  management,  and  the  other  in- 
adequate facilities.  In  support  of  the  one,  it 
was  pointed  out  in  a  parliamentary  resolution 
in  1858,  that  there  was  a  deficit  of  £4,400,000 
for  the  year  previous ;  and  in  support  of  the 
other  it  was  shown  in  1860  that  out  of  a  total 
number  of  638  banks  350  were  open  only  one 
day  in  a  week,  and  then  only  for  a  few  hours, 
and  that  twenty  towns  and  fourteen  counties, 
each  containing  upwards  of  10,000  inhabitants 
were  wholly  without  savings  facilities.  This 
indictment,  thus  clearly  drawn  and  supported 
by  such  startling  facts  before  the  bar  of  pub- 
lic opinion,  was  finally  followed  by  conviction ; 
and  a  measure,  which  had  been  presented  by 
Mr.  William  Sykes  in  1859,  was  favored  both 
by  Mr.  Gladstone,  then  Chancellor  of  the 
Exchequer,  and  by  Sir  Rowland  Hill,  Secretary 
to  the  Post- Office,  and  was  revised  and  pushed 
to  its  passage  on  the  iTth  of  May,  1861. 
In  the  beginning  the  policy  of  the  depart- 


338  SAVINGS  INSTITUTIONS 

ment  was  to  open  savings  banks  only  in  those 
places  where  the  private  system  had  no  offices, 
and  in  the  first  year  they  were  limited  to  Eng- 
land, but  in  1862,  they  were  extended  to  Scot- 
land and  Ireland. 

The  general  features,  as  described  by  the 
Postmaster-General,  were : 

' '  That  deposits — at  whatever  post-office  they 
might  be  made — might  be  withdrawn  at  that 
or  any  other  post-office  transacting  savings 
bank  business;  but  the  accounts  should  be 
kept  at  London  alone,  all  moneys  being  re- 
mitted at  headquarters ;  that  the  whole  amount 
deposited  should  be  handed  over  to  the  Com- 
missioners for  the  Reduction  of  the  National 
Debt  for  Investment  in  Public  Securities;  and 
that  interest  on  complete  pounds  at  the  rate 
of  £2  10  s.  per  cent  be  allowed  to  depositors. 
Deposits  were  to  be  made  of  one  shilling  or 
multiples  of  one  shilling;  the  limit  of  the  de- 
posits for  individuals  was  £30  a  year  or  £130 
in  all;  but  the  Friendly  Societies  might  deposit 
without  limit,  and  Provident  and  Chaiitable 
Societies  might  deposit  within  the  limits  of 
£100  a  year,  and  £300  in  all,  or  with  the  assent 
of  the  National  Debt  Commissioners,  beyond 
those  limits."' 

1  After  two  years  of  trial  tlie  deposits  aggregated  £4,702,- 
000;  by  1867  there  were  3,629  post-offlce  saving  banks  with 
nearly  855,000  depositors,  and  accounts  amounting  to  £6,750,- 


POSTAL  SAVINGS  IN  ENGLAND      339 

To  guard  against  the  appropriation  of  the 
benefits  by  others  than  those  for  whom  they 
were  intended,  various  safe-guards  are  es- 
tabUshed.  For  example,  each  individual  is 
limited  to  one  savings  bank  account.  The 
minimum  interest-bearing  account  as  well  as 
the  minimum  deposit  that  will  be  accepted  is 
a  shilling.  But  for  the  benefit  of  youthful 
depositors,  to  many  of  whom  a  shilling  repre- 
sents quite  a  saving  power,  cards  are  issued 
by  the  post-office  containing  spaces  to  be  filled 
in  with  postage  stamps;  and  when  one  of 
these  cards  contains  a  shilling's  worth  of 
stamps  it  will  be  accepted  as  a  deposit.  This 
device  is  peculiarly  adapted  for  use  in  the 
schools;  and  this  is  one  of  the  ways  by  which 
the  Department  of  Education  and  the  Post- 
master-General  work   together  to  make  the 

000;  at  the  close  of  1878  there  were  5,851  banks,  with  1,893,- 
■^000  depositors  and  accounts  amounting  to  £30,410,000  and 
•according  to  an  estimate  from  the  report  of  1899  there  was  in 
the  United  Kingdom  a  postal  savings  account  for  every  5.29 
of  the  total  population  ; — for  England  and  Wales,  the  average 
being  one  to  every  4.53,  for  Scotland  one  to  12.98,  and  for  Ire- 
land one  to  13.28. 


340  SAVINGS    INSTITUTIONS 

post-office  banks  serve  the  schools.  Another 
way  is  for  the  post-office  clerks,  upon  request, 
to  attend  the  schools  to  open  accounts  and  re- 
ceive deposits  from  the  children,  ^ 

The  school  managers  are  urged  by  the  gov- 
ernment authorities  to  bring  this  scheme  of 
savings  before  their  pupils  and  to  organize 
them  into  savings  bodies  as  far  as  possible. 
The  idea  was  suggested  by  the  Free  Education 
act  of  1891,  making  tuition  free.  It  was  thus 
sought  to  seize  the  opportunity  to  save  the 
school  pence  which  are  no  longer  required  for 
tuition.  The  arrangement  was  introduced  in 
1892  and  about  1,400  schools  took  advantage 
of  it  as  once;  in  three  years  the  number 
had  risen  to  3,000,  and  about  £30,000  were 
deposited  in  the  first  year.  The  Postmaster- 
General,  however,  records  with  regret  that 
according  to  the  reports  for  1895  the  "  move- 

^  The  average  annual  results  of  the  stamp  card  business  has 
been : 

1881-1885 l,;i09,(K)()  cards  for  £68,000 

1886-1890 1,183,000  cards  for    59,000 

1891-1895 1,618,(100  cards  for    86,000 

1896 1,741,000  cards  for    95,000 


POSTAL   SAVINGS   IN   ENGLAND  341 

ment  for  the  promotion  of  thrift  in  the  ele- 
mentary schools  shows  signs  of  having  spent 
its  force. ' '  The  friends  of  school  savings  will 
hope  that  events  will  prove  the  error  of  this 
judgment,  for  the  conditions  seem  to  be  very- 
favorable.  The  masters  have  only  to  in- 
struct the  pupils  in  the  principles  of  saving, 
the  mechanical  features  and  the  administra- 
tive facilities  being  provided  by  the  state. 

The  interest  rate  is  fixed  at  2.50  per  cent, 
which  is  calculated  from  the  first  of  the  month 
following  the  date  of  deposit  to  the  last  of 
the  month  preceding  the  date  of  the  with- 
drawal, and  after  December  first  of  each  year 
the  accrued  interest  is  added  to  the  principal. 
But  the  interest  rate  does  not  represent  the 
net  earnings  of  the  institution  and  the  policy 
of  adjusting  the  rate  from  time  to  time  to  the 
earning  power  of  the  money  has  not  been  fol- 
lowed; for  every  year  prior  to  1896  a  profit 
has  accrued  to  the  state,  and  an  increasing 
economy  of  administration,  which  has  been 
facilitated  by  an  expanding  volume  of  busi- 


342  SAVINGS    INSTITUTIONS 

ness,  has  sought  to  keep  up  this  record.  The- 
expense  of  each  transaction  has  been  reduced 
from  over  seven  pence  to  six  pence.  Notwith- 
standing this,  however,  the  profit  has  changed 
into  a  deficit,  owing  to  the  high  price  of  con- 
sols. 

The  interests  of  the  laboring  classes  ar& 
carefully  looked  after  in  the  matter  of  with- 
drawals. In  case  of  a  change  of  residence 
an  account  need  not  be  withdrawn,  but  it  may 
be  transferred  from  one  office  to  another  with- 
out any  disturbance  of  the  interest ;  and  if  a^ 
depositor  wishes  to  withdraw  at  a  distance 
from  the  place  where  the  account  is  kept  he 
may  do  it  through  the  local  office.  And  the 
same  privilege  is  permitted  in  making  deposits ; 
they  may  be  made  through  offices  other  than 
the  one  in  which  the  account  is  kept.  These 
privileges  are  used  to  an  increasing  extent,  as 
in  1890  of  all  the  deposits  and  withdrawals 
twenty-nine  per  cent  were  made  in  this  way ;  in 
1892  it  was  thirty-two  per  cent ;  in  1894,  it  was 
thirty-four  per  cent;  and  in  1898,  36.5  percent. 


POSTAL  SAVINGS   IN   ENGLAND  343 

Withdrawals  may  also  be  made  by  telegraph, 
which  service  is  found  in  the  same  office  with 
the  savings  bank  and  the  regular  postal  ser- 
vice— an  arrangement  which  was  put  in  force 
in  December,  1893,  but  not  without  misgivings 
as  to  its  propriety.     The  report  for  1896  says: 

"  Postmasters-General  have  hesitated  long 
before  sanctioning  this  departure.  It  was 
known  that  the  system  was  in  force  abroad 
and  it  was  recognized  that  there  might  be, 
and  doubtless  were,  cases  in  this  country 
where  the  possibility  of  withdrawing  money 
without  delay  might  be  all  important  and 
might  save  a  depositor  from  debt  and  distress. 
But,  on  the  other  hand,  it  was  strongly  held 
that  the  cause  of  thrift  was  sometimes  served 
by  interposing  a  delay  between  a  sudden  de- 
sire to  spend  and  its  realization ;  and  it  was 
also  held  to  be  essential  to  maintain  a  marked 
distinction  between  the  bank  of  deposit  for 
savings  and  a  bank  for  keeping  a  current  ac- 
count. The  balance  of  opinion  was  in  favor 
of  a  change  and  the  results  showed  an  active 
demand  for  it,  for  in  the  first  six  months  21,- 
000  depositors  used  it." 

Two  methods  of  such  withdrawals  were 
provided,  either  by  telegraphing  the  home 
office  to  forward  the  amount  by  the  return 
post,  or  to  telegraph  the  warrant  and  have  it 


344  SAVINGS    INSTITUTIONS 

paid  within  an  hour  or  two.  The  first  method 
cost  the  depositor  nine  pence  and  the  second 
1  s.  3  d.  During  the  year  1896,  the  with- 
drawals by  telegraph  were  by  return  of  post 
8,000,  by  return  of  telegram  94,900;  and  dur- 
ing the  year  1898,  the  record  stood  10,563 
and  141,783  respectively.^ 

The  system  of  government  annuities,  in 
connection  with  the  savings  bank,  has  been  in 
use  in  England  since  1883.  A  contemporary 
writer,  James  William  Gilbart,  then  Manager 
of  the  London  and  Westminster  Bank,  gives 
the  following  account  of  this  addition  to  the 
general  scheme  for  promoting  savings : 

"  The  savings  banks  were  rendered  increas- 
ingly useful  to  the  public  hj  an  Act  (3  Wra. 
IV.,  c.  14)  passed  in  1833,  to  enable  depositors 
in  savings  banks,  and  others,  to  purchase 
government  annuities  through  the  medium  of 
savings  banks.  They  may  be  obtained  at  the 
savings  banks,  whether  the  purchaser  is  a  de- 
positor or  not,  and  the  annuities  may  be  either 
immediate  or  deferred,  and  for  a  term  of  years 
or  for  life.  The  annuity,  however,  must  not 
exceed  the  sum  of  £20,  nor  be  granted  on  any 

^  Postmaster-General's  Reports  for  1897  and  1899. 


POSTAL  SAVINGS  IN  ENGLAND      345 

life  under  fifteen  years  of  age.  The  sums 
paid  for  the  purchase  of  these  annuities  are 
received  at  the  savings  banks,  and  the  annuity- 
is  paid  at  the  savings  banks.  It  may,  how- 
ever, be  paid  at  a  different  savings  bank  than 
that  which  receives  the  purchase  money,  if 
the  party  desires  it.  The  purchaser  of  an 
annuity  upon  any  Hfe  may  subsequently  pur- 
chase an  additional  annuity  upon  the  same 
life,  without  fresh  certificates  as  to  the  age  of 
the  nominee,  but  both  annuities  together  must 
not  exceed  the  sum  of  £20.  If  the  annual 
payments  made  for  the  purchase  of  a  deferred 
annuity  be  not  kept  up,  or  if  the  nominee  of 
a  deferred  life  annuity  dies  before  the  annuity 
commences,  then  aU  payments  made  for  the 
purchase  thereof  are  to  be  returned.  In 
places  where  no  savings  bank  is  established,  a 
society  may  be  established  for  the  purpose  of 
granting  annuities,  provided  the  rector,  or 
vicar,  or  minister  of  the  parish,  for  the  time 
being,  or  a  resident  Justice  of  the  Peace,  be 
one  of  the  trustees  of  the  said  society.  No 
annuity  granted  under  this  Act  is  liable  to  any 
taxes,  charges  or  impositions  whatever. ' '  ^ 

The  act  providing  for  life  insurance  and  for 
the  purchase  of  annuities  through  the  post- 
office  in  selected  towns  in  England  and  Wales, 
went  into  effect  in  1865,  but  it  was  still  not 
connected  with  the  savings  bank.     Lives  be- 

1  The  History  and  Principles  of  Banking,  p.  221. 


346  SAVINGS    INSTITUTIONS 

tween  sixteen  and  sixty  years  of  age  were  in- 
sured and  the  amounts  provided  for  were  from 
£20  to  £100;  and  annuities,  either  immediate 
or  deferred,  were  granted  to  persons  from  ten 
years  of  age  upwards  in  amounts  from  £4  to 
£50.  The  law  remained  unaltered  until  the 
3d  of  June,  1884,  and  in  this  period  7,064 
policies  of  insurance  were  effected,  represent- 
ing a  yearly  average  of  372  policies  of  £79 
each.  The  annuities  proved  to  be  more  popu- 
lar, and  contracts  for  immediate  annuities  in 
this  period  numbered  13,402  and  for  deferred 
annuities  973,  and  the  amount  of  the  immedi- 
ate annuities  was  £187,117,  and  of  the  deferred 
£19,938.  Since  1884,  the  selected  town  ar- 
rangement is  done  away  with  and  the  insur- 
ance and  annuity  systems  are  made  coexten- 
sive with  the  postal  savings  bank. 

The  act  of  1884  also  provides  that  the  limits 
of  insurance  for  persons  between  the  ages  of 
fourteen  and  sixty,  instead  of  sixteen  and 
sixty,  should  be  £5  and  £100,  instead  of  £20 
and  £100,  and  that  the  sums  of  money  might 


POSTAL   SAVINGS   IN   ENGLAND  347 

be  payable  at  the  age  of  sixty  or  at  the  ex- 
piration of  terms  of  years.  In  the  case  of 
annuities,  the  minimum  is  reduced  from  £20 
to  £1,  and  the  maximum  is  raised  from  £50 
to  £100.  And  the  effect  of  the  changes  may 
be  noted  by  a  comparison  of  the  years  1886 
and  1883.  Annuities  granted  in  1886  were 
2,208  for  £60,965  against  770  for  £14,141  in 
1883;  the  number  of  deferred  annuities  was 
202  for  £4,178  against  104  for  £2,002;  and  the 
number  of  insurance  pohcies  was  1,223  for 
£65,582  against  256  for  £20,600.  ^ 

This  Kne  of  effort  has  not  yet  made  much 
of  an  impression  upon  the  general  habits  of 
the  people,  and  it  has  been  proposed  that 
these  services  be  extended  by  a  system  of 
active  canvassing  among  the  working  people 
after  the  manner  of  private  companies;  but 
the  plan  was  negatived  by  the  report  of  the 


1  There  has  been  a  general  decline  in  this  department.  In 
1898  there  were  only  2,065  immediate  annuities  granted  for 
£55,753;  only  164  deferred  annuities  for  £3,626;  and  there 
were  only  731  life  insurance  policies  granted  amountinff  to 
£42,554. 


34:8  SAVINGS    INSTITUTIONS 

Select  Committee  of  1882.'  The  saviogs 
bank  also  acts  as  agent  for  its  patrons  for  the 
purchase  of  government  stock.  This  may  be 
for  a  double  motive,  viz.,  the  setting  before 
the  mind  of  the  depositor  of  a  specific  object 
for  which  to  save,  and  the  encouragement  of 
patriotism  by  giving  a  large  number  of  people 
a  financial  stake  in  the  country. 

The  method  of  such  purchases  is  described 
as  follows:  "Any  person  desiring  to  invest 
any  sum  between  £10  and  £100  in  Govern- 
ment Stock,  can  do  so  through  the  agency  of 
a  savings  bank  at  a  trifling  expense,  varying 
from  9  d.  to  2  s.  3d.,  and  have  the  dividends 
collected  free  of  further  charge.  The  pur- 
chase can  be  effected  either  by  transferring 

^  A  special  effort  has  been  made  by  the  employees  during 
two  years  of  the  past  decade  to  increase  the  business  witli  the 
following  result: 

Year 

1892. 
1893. 
1894. 
189"). 
1896. 
*Years  of  special  effort. 


No.  of 
Insurances 

Amount 
Insured 

Increase  and  Decrease  per  cent 
Number                        Amount 

.  .*1,993 

80,307 

. .      853 

44,000 

Decrease  56.98 

Decrease  45.21 

.  .*1,128 

56,010 

Increase   32.23 

Increase  27.39 

. .      720 

38,358 

Decrease  36.17 

Decrease  31.51 

.  .*1,223 

65,582 

Increase   69.86 

Increase  70.97 

POSTAL   SAVINGS   IN   ENGLAND  349 

money  from  the  depositor's  account,  or  by 
means  of  a  sum  specially  deposited  for  im- 
mediate investment."'  The  savings  bank  acts 
as  agent  both  in  making  purchases  of  stock 
for  its  customers,  in  which  case  the  stock  is 
kept  in  the  custody  of  the  bank  but  in  the 
name  of  the  customer,  and  in  placing  such 
stock  on  the  market  when  the  customer  de- 
sires to  dispose  of  it.  ^ 

Considered  as  an  investment  of  earnings  it 
does  not  seem  to  be  the  best.  It  may  be  the 
only  feasable  form  of  investment,  and  it  cer- 
tainly serves  well  as  an  automatic  device  for 
keeping  the  deposit  accounts  within  the  pre- 
scribed maximum,  but  as  an  expedient  for 
starting  the  graduate  in  saving  culture  upon 
a  career  as  a  capitalist  it  seems  to  be  lacking 

1  The  average  annual  statistics  of  this  business  are  as 
follows : 

Tear  Investment  Sales  Stock  remaining  at 

end  of  the  year 

1881-85 14,000  5,000  £1,554,000 

188&-90 19,000  11,000  3,776,000 

1891-95 23,000  16,000  6,206,000 

1896       17,000  18,000  6,892,000 

1898       20,000  12,000  7,462,000 


350  SAVINGS    INSTITUTIONS 

in  a  most  essential  feature.  The  capitalized 
sum  should  yield  a  larger  income  than  the 
savings  in  process  of  accumulation;  it  must 
generally  require  a  larger  return  to  induce 
continued  abstinence — to  prevent  its  disin- 
tegration. The  law  of  self-interest  does  not 
apply  with  the  same  force  in  both  cases.  Dur- 
ing a  good  part  of  the  saving  period  ultimate 
capitalism  is  not  the  controlling  motive,  it  is 
a  means  to  a  more  royal  expenditure.  The 
interest  and  the  safe  custody  afforded  serve  as 
stimuli  to  this  end,  but  it  is  the  grand  finale 
of  indulgence  that  carries  the  process  through 
the  critical  stage.  The  capitalistic  tendency 
has  developed  some  strength  by  the  time  the 
maximum  is  reached,  but  it  has  seldom  ma- 
tured into  a  controlling  determination.  A 
considerable  increase  in  the  interest  rate  at 
this  point  would  seem  to  be  a  logical  corollary 
to  the  immediate  objects  of  savings  banks.  ^ 

*  F(ir  a  fuller  discussion  of  this  phase  of  the  subject  see 
article  on  Savings  Bank  Reform  by  Robert  Ewen  in  West- 
minster Review  for  February,  1897. 


POSTAL  SAVINGS  IN  ENGLAND      351 

The  following  classification  of  patrons,  taken 
from  the  annual  report  of  1897  shows  that 
the  banks  are  reaching  the  desired  persons : 

Percentage  of  tolal 

Professional 1.55 

Official 2.81 

Educational 1.01 

Commercial 3.88 

Agricultural  and  fishing 1.33 

Industrial 18.43 

Railway,  shipping  and  transport 2.96 

Tradesmen  and  their  assistants 8. 14 

Domestic  service 8.61 

Miscellaneous 0. 37 

Persons  describing  themselves  as 
married  women,  spinsters,  widows, 
and  children 50.41 

It  would  be  interesting  to  know  of  the  pat- 
ronage of  the  classes  within  classes — as  how 
largely  they  are  patronized  by  persons  of 
different  grades  of  income. 

The  following  table  of  averages  of  accounts 
and  deposits  shows  that  very  many  of  the 
patrons  must  enjoy  comfortable  incomes : 

Tear  Ami.  of  average  deposit  A'ge.  amt.  of  each  account 

1887 £2    7  s.  lOd.  £13  l.s's.    2d. 

1888 2  10        6  13  17        5 

1889 2    8      11  13  19       6 

1890 2    7      10  14    0        3 

1891 2    7        9  13  19      10 


352  SAVINGS    INSTITUTIONS 

1892 2  8  2  13  18  3 

1893 2  10  1  14  0  5 

1894 2  15  6  14  12  3 

1895 2  16  4  15  3  4 

1896 2  17  5  15  15  4 

1900 2  14  7  11  9  2 

A  sub-classification  of  accounts  shows  that 
90.8  per  cent  of  the  total  patronage  have  ac- 
counts not  exceeding  fifty  pounds,  and  only  0.4 
percent  have  accounts  exceeding  two  hundred 
pounds.  But  this  classification  is  not  satis- 
factory, for  it  tells  nothing  about  the  poor  de- 
positor. An  account  of  £50  reveals  a  high 
saving  power  and  suggests  a  comfortable  in- 
come. It  would  be  much  more  interesting  to 
know  what  percentage  of  the  total  accounts 
would  not  exceed  £10  in  amount. 

Another  evidence  of  success  is  to  be  found 
in  the  amount  of  the  withdrawals.  We  see 
here  an  index  to  the  class  of  expenditure  to 
which  withdrawals  are  applied.  A  small 
average  deposit  or  a  small  average  account 
might  suggest  an  extensive  usefulness  of  the 
institution,  but  contrariwise,  in  the  matter  of 
withdrawals,   success  is  to  be  read  in  large 


POSTAL   SAVTN'GS    IN    ENGLAND  353 

figures.  A  small  average  withdrawal  might 
indicate  that  a  large  nmuber  of  depositors 
■were  faihng  in  the  programme  of  self-denial, 
or  it  might  indicate  a  reaction  in  the  form  of 
dissipation,  a  season  of  denial  being  followed 
by  a  season  of  over  indulgence ;  or  it  might 
indicate  a  prevalent  disposition  to  tap  the  sav- 
ings fund  for  comparatively  trivial  objects. 

Large  withdi-awals  must  be  taken  as  a 
favorable  sign  when  there  exists  no  reason  for 
withdrawing  in  case  of  a  change  of  residence 
with  the  intention  of  redepositing  at  the  new 
home ;  and  they  may  fairly  be  taken  as  evi- 
dence that  the  savings  bank  is  being  made  the 
means  of  substantial  economic  and  social 
growth :  and  they  certainly  mean  considerable 
power  in  postponing  wants.  The  following 
tables  will  show  average  withdrawals  for 
different  years: 

Xurrvbtrr  Artrage  AffWvnt 

1887 •:.496.(XX1  £5  17  s  7  d 

1888 ^.GSSAXX)  6        0  0 

1889 2.757.IXX1  6        1  11 

1890 i.89i.000  6        3  10 

1891 3.126.0W  6        1  8 


354  SAVINGS    INSTITUTIONS 

1893 3,335.000  6  2  0 

1893 3.618,000  6  0  3 

1894 3,863,000  6  3  1 

1895 4.102.000  6  5  3 

1896 4,367,000  6  10  5 

1897 4,670,000  6  11  2 

1898 4,957,000  6  12  11 

1900 5,406,000  7  2  7 

A  withdrawal  of  two  pounds  or  more  is 
suggestive  of  a  wholesome  purpose,  — and  an 
average  of  over  six  pounds  seems  to  be  con- 
clusive evidence  that  the  postal  bank  is  culti- 
vating an  increase  of  productive  consumption 
on  the  part  of  the  laboring  classes. 

The  most  unique  incident  of  the  growth  of 
the  state  system  in  England  has  been  the 
marked  tendency  to  absorb  the  patronage 
that  had  been  built  up  by  the  trustee  banks. 
There  is  a  decided  tendency  to  a  monopoly  of 
the  field,  and  the  annual  reduction  in  the  num- 
ber of  institutions  of  the  trustee  type  points 
to  their  final  extinction,  with  the  exception  of 
a  few  well  intrenched  institutions  which  tend 
to  assume  the  character  of  investment  societies 
rather  than  savings  banks — and  at  no  very 
distant  date. 


POSTAL  SAVINGS  IN  ENGLAND      355 

This  condition  cannot  be  accounted  for  on 
the  ground  of  any  scarcity  of  the  trustee 
spirit— there  is  perhaps  more  of  it  in  England 
than  in  any  other  country.  The  chief  reason 
must  be  found  in  the  superior  adaptation  of 
the  post-office  system  to  the  needs  of  the 
working  class ;  it  cannot  be  assigned  to  any 
doctrinal  preference  for  a  public  institution. 
The  fact  that  the  one  class  is  regarded  as  abso- 
lutely solvent  and  that  there  is  more  or  less  of 
risk  to  deposits  in  the  other  is  doubtless  an 
important  factor.  And  the  disadvantage  of 
the  trustee  banks  in  the  matter  of  the  cost  of 
administration  is  another.  And  the  relative 
absence  of  a  spirit  of  aggressive  rivalry  may 
be  still  another.  If  an  institution  is  in  the 
purest  sense  a  trustee  bank  it  is  not  tenacious 
of  life,  except  as  it  seems  to  fill  a  want  which 
would  otherwise  be  neglected.  It  is  doubtless 
true  that  in  the  larger  institutions  the  force  of 
salaried  officials  constitute  a  fighting  element 
which  renders  their  continued  existence  more 
than  a  question  of  expediency — the  pecuniary 


356  SAVINGS    INSTITUTIONS 

interest  of  the  paid  managers  will  educate  the 
moral  sense  of  the  disinterested  trustees  to 
their  way  of  thinking  to  a  greater  or  less  ex- 
tent. And  the  mere  pride  in  an  accustomed 
practice  of  philanthropy  constitutes  a  barrier 
to  change.  But  where  the  pecuniary  element 
is  entirely  absent,  as  where  volunteer  workers 
do  the  clerical  and  administrative  services,  as 
well  as  the  supervisory,  the  arguments  in 
favor  of  dissolution  when  the  post-office  offers 
an  equally  good  service,  and  in  most  cases  a 
much  better  service,  in  the  same  neighbor- 
hood, are  apt  to  be  convincing. 


CHAPTER  XI 

POSTAL  SAVINGS  BANKS  ON  THE  CONTINENT 

The  example  of  England  in  establishing 
postal  savings  banks  was  followed  by  a  num- 
ber of  the  most  progressive  countries,  as 
Canada  in  1868,  Belgium  in  1870,  Italy  in 
1876,  Netherlands  in  1881,  France  and  Sweden 
in  1882,  Austria  in  1883,  Hungary  in  1886, 
and  later  by  Russia,  Finnland,  a  number  of 
the  British  colonies  in  AustraUa  and  Africa, 
and,  finally,  by  Japan,  The  British  colonies 
have  followed  quite  closely  the  conservative 
lines  set  by  the  example  of  the  mother  coun- 
try, while  the  continental  banks,  with  the 
exception  of  the  French  system,  seem  to  have 
been  worked  out  with  the  Enghsh  system 
simply  as  a  basis  for  study. 

THE    BELGIAN    SYSTEM 

The  experimental  spirit  which  was  pursued 
by  Belgium  may  be  described  as  peculiar  to 
continental  countries. 

(357) 


358  SAVINGS    INSTITUTIONS 

The  need  of  a  better  system  of  savings  in. 
Belgium  than  the  one  existing  prior  to  the  in- 
troduction of  postal  savings  banks  was  even 
greater  than  it  had  been  in  England.  In  fact 
there  was  only  one  savings  institution  of  any 
importance  in  the  kingdom,  which  was  known 
as  the  Central  Savings  Bank  of  the  Societe 
General,  and  in  this  there  was  on  deposit  only 
16,000,000  francs  and  it  was  little  resorted  to 
by  the  poorer  classes. 

The  Belgian  government  in  seeking  to 
remedy  this  condition,  in  1865,  adopted  the 
principle  of  a  national  system,  but  it  did  not 
at  once  employ  the  Post- Office  Department  for 
this  purpose.  It  created  a  distinct  institution 
under  the  control  of  a  central  office,  and  for 
the  receipt  and  repayment  of  deposits  it  em- 
ployed the  branches  of  the  Belgian  National 
Bank  and  a  number  of  agencies  of  its  own. 

The  year  1870  is  taken  as  the  date  of  the 
founding  of  the  Belgian  Postal  Savings  Bank, 
because  it  was  in  that  year  that  the  different 
post-offices  of  the  kingdom  were  added  to  the 


POSTAL   SAYINGS   IN   BELGIUM  359 

existing  agencies  for  the  receipt  and  payment 
of  deposits.  This  was  nothing  more  than  an 
extension  of  the  existing  institution.  While  the 
increase  of  facihties  was  a  most  significant 
fact,  probably  the  thing  essential  to  its 
thrifty  growth,  the  original  arrangement 
gave  to  the  Belgian  system  its  distinctive 
administrative  principle,  in  which  it  still  differs 
most  radically  from  the  English.  Instead  of 
the  administration  being  a  function  of  the 
Post- Office  Department,  it  is  an  independent 
branch  of  the  government,  the  post-office 
agencies  having  only  clerical  work  to  perform. 

Another  interesting  departure  consists  in  the 
absence  of  any  hmit  to  the  amount  of  an  in- 
dividual account ;  a  safe  depository  is  afforded 
to  all  classes,  and  the  only  restriction  placed 
upon  deposits  is  a  limit  to  the  amount  which 
one  person  may  deposit  within  a  month  to 
5,000  francs. 

The  General  Council  has  also  made  some  in- 
teresting experiments  in  the  adjustment  of  the 
interest  rate  in  the   way   of    discriminating 


360  SA.VINGS   INSTITUTIONS 

against  the  large  and  in  favor  of  the  small 
depositors.  In  1881  a  rule  was  put  into  force 
providing  that  in  case  an  account  should  ex- 
ceed 12,000  francs  in  amount,  the  interest  paid 
at  the  old  rate  of  three  per  cent  should  be  paid 
on  12,000  francs,  and  that  any  sum  in  excess 
should  bear  only  two  per  cent,  but  under  this 
condition  accounts  might  be  kept  in  any 
amount.  The  effect  was  a  falling  off  of  large 
accounts  and  a  decided  faUing  off  in  the 
amount  of  new  money  deposited.  The  aver- 
age account  at  the  beginning  of  the  year  was 
642  francs  and  it  fell  to  547  francs  at  the  close, 
and  to  363  francs  at  the  beginning  of  1883. 
The  amount  of  the  new  deposits  also  fell  off 
very  appreciably.  In  1880  it  had  been  17,000,- 
000  francs  and  in  the  year  of  the  change  of 
the  interest  rate  it  fell  to  3,000,000  and  in  the 
year  following  to  500,000  francs. 

But  if  the  change  had  any  effect  upon  the 
total  number  of  deposits,  it  seems  to  have 
been  helpful,  for  during  this  time  there  was  a 
decided  increase  in  them. 


POSTAL  SAVINGS   IN   BELGIUM  361 

Another  rule  was  put  into  effect  on  May 
13th,  1886,  reducing  the  three  per  cent  hmit 
to  5,000  francs,  with  similar  results.  And 
precisely  the  same  tendency  followed  the  rule 
which  was  put  into  force  in  1891  reducing  the 
three  per  cent  limit  to  3,000  francs,  and  also 
the  present  rule  which  went  into  effect  in  1894 
allowing  two  per  cent  interest  on  an  entire 
account  when  it  exceeds  3,000  francs  in 
amount.  ^ 

1  The  Official  Report  for  1897  gives  the  following  table 
showing  the  effect  of  the  different  niles  regulating  the  rate 
of  interest. 

INCREASE  OF  BUSINESS 
No.of  Books       value  in  mUlionfrs.         ^^ZfcVA 

1880       23,823  17  624  frs. 

1881  (a) 34,287  3  547 

1882  90,623  0.5  863 

1883  45,293  14  383 

1884  35,818  17  391 

1885  37,431  30  426 

1886  (b) 41,323  28  447 

1887  61,201  33  439 

1888  52,064  20  435 

1889  58,632  22  430 

1890  73,750  43  445 

1891  (c) 69,017  8  417 

1892       69,873  18  404 

1893 90,521  39  406 

1894  (d) 93,231  37  406 

1895       91,709  26  396 

1896       93,193  28  388 

1897       139,042  51  386 

1898       137,167  33  373 


362  SAVINGS    INSTITUTIONS 

The  last  experiment  makes  it  quite  clear  that 
the  savings  bank  appeals  to  many  persons  of 
large  means.  This  does  not  necessarily  mean, 
however,  that  it  interferes  with  the  commer- 
cial bank,  for  the  money  is  not  ordinary  bank 
money,  but  it  does  mean  that  the  savings 
bank  is  acceptable  to  many  capitahsts.  When 
the  Council  decided  not  to  give  the  large  de- 
positors the  full  earnings,  but,  instead,  to 
strengthen  the  administration  by  realizing  a 
net  profit  on  their  business,  there  followed  a 
very  radical  shrinkage  in  this  class  of  busi- 
ness. It  probably  did  not  come  from  entire 
withdrawals  of  the  large  accounts  but  from 
their  reduction  to  the  three  per  cent  limit, 

(a)  A  decision  by  the  general  council  of  July  14,  1881,  re- 
duced the  interest  rate  of  that  portion  of  every  account  which 
should  exceed  12,000  francs  to  2^. 

{b)  A  decision  of  13th  of  May,  1886,  provided  that  the  rate 
of  2^  only  should  be  paid  on  any  excess  of  5,000  francs. 

(c)  A  rule  of  25th  of  June,  1891,  provided  a  2j^  rate  for  any 
excess  of  3,000  francs. 

{d)  A  rule  of  Oct.  18th,  1894  made  the  2%  rate  apply  to  the 
whole  of  all  accounts  which  should  exceed  3,000  francs  in 
amount. 

The  years  1897  and  1888  are  computed  from  the  latest  report. 


POSTAL    SATIN-GS   IN   BELGIUM  363 

which  probably  explains  the  enormous  increase 
in  the  number  of  accounts  ranging  in  amount 
between  1,000  and  3,000  francs.  ^ 

The  reason  for  the  last  rule  is  not  clear.  It 
would  tend  only  in  a  small  degree  to  discour- 
age the  well-to-do  depositor  and  there  could  be 
no  assurance  that  it  would  be  more  profit- 
able to  the  holders  of  smaller  accounts.  It 
would  seem  to  tend  rather  to  cause  him  to 
guard  carefuUy  his  accoim^t  to  prevent  its 
merging  into  the  two  per  cent  class.  On  the 
other  hand  if  it  were  only  the  surplus  that 
would  bear  the  lower  rate,  such  surplus  would 
be  continually  accumulating  and  to  the  final 
profit  of  the  owners  of  small  accounts. 

The  rules  as  to  the  withdrawals  are  very 

-  The  foUowing  table  shows  the  distribution  of  accounts, 
according  to  their  amount,  as  the  accounts  stood  on  the  31st  of 
December  of  each  year: 

Within  1.000 francg     From  i.ooo  to  3,000  frs.    Above  3.000  frs. 
Vo  of    Sumofde-      y      f     Sum  of  de-     ^       ^  Sum  of  de- 
Books     posits  in        ']°^V     demmtfin      '^^-VpoHiiin 
^°°''^  million  frs.      ^^°**    million  frs.     '^°°'^    mill.  frs. 


1893. 

.  832.427 

99.5 

102,674 

181 

25.367 

no 

1894. 

.  911.950 

109 

116,938 

208 

a4,8ii 

109 

1895. 

.  990.221 

119 

133,087 

240 

21,500 

94 

1896. 

.1070,929 

130 

149.9.54 

274 

17,718 

77 

1897. 

.1192,368 

144 

167,613 

309 

17,662 

79 

364  SAVINGS    INSTITUTIONS 

conservative.  For  example,  only  sums  within 
100  francs  may  be  withdrawn  at  a  time,  and 
the  following  restrictions  may  be  imposed  up- 
on larger  sums:  between  100  francs  and  500 
francs  a  notice  of  fifteen  days  may  be  re- 
quired; for  amounts  ranging  between  500 
francs  and  1,000  francs  a  month's  notice  may 
be  required;  for  amounts  ranging  between 
1,000  francs  and  5,000  francs  two  months, 
and  for  sums  exceeding  5,000  francs  a  notice 
of  six  months  may  be  required.  These  re- 
strictions upon  withdrawals  may  be  for  a  two- 
fold purpose :  to  throw  obstacles  in  the  way 
of  withdrawing  money,  or  in  the  interest 
of  standing  deposits ;  and  for  the  protection  of 
the  management  (to  permit  a  low  reserve 
without  incurring  too  great  a  risk  of  demands 
for  money  in  excess  of  the  preparation  to 
meet  them).  The  fact  that  the  limitations 
are  discretionary  and  not  mandatory  seems  to 
Indicate  that  business  expediency  is  the  chief 
motive  in  this  case. 

Inhabitants  of   the  rural  communities  are 


POSTAL  SAVINGS   IN  BELGIUM  365 

excellently  provided  for  in  being  permitted  to 
deposit  through  the  letter  carriers ;  after  an 
account  is  once  opened  the  rural  depositor  may 
make  subsequent  deposits  in  amounts  within 
500  francs  in  this  way. 

The  English  plan  of  permitting  both  deposits 
and  withdrawals  through  other  agencies  than 
the  one  in  which  the  account  is  kept  is  fol- 
lowed. Entries  of  deposits  are  made  in  the 
pass-books  by  pasting  in  coupons  stating  the 
amount,  the  clerk  setting  his  signature  op- 
posite each  entry. 

In  the  matter  of  making  loans  the  Belgian 
system  exercises  considerable  latitude,  even 
authorizing  the  acceptance  of  personal  secur- 
ity, which  must  be  for  even  hundreds  of  francs, 
and  for  no  sum  less  than  200  francs. 

In  this  connection  it  should  be  noted  that 
the  institution  has,  to  an  unusual  extent,  the 
character  of  a  credit  and  loan  association, 
both  directly,  and  through  affiliation  with  pri- 
vate societies.  During  1897  as  many  as  184 
agricultural  loans  were  made  for  a  total  of 


366  SAVINGS    INSTITUTIONS 

$264,984,  and  the  total  value  of  agricultural 
loans  negotiated  between  1884  and  December 
31,  1897  amounted  to  $1,282,308. 

The  Belgian  system  contains  a  pension 
scheme  analogous  to  the  English  annuity 
department.  And  this,  contrary  to  the  ex- 
perience in  England,  is  witnessing  a  rapid  de- 
velopment at  present,  which  may  be  due  to 
an  active  effort  on  the  part  of  the  officials  and 
others  to  present  its  attractions  to  the  public. 
During  the  year  1897  there  were  17,506  new 
books  issued,  and  deposits  to  the  number  of 
171,506,  and  an  encouraging  feature  is  the  fact 
that  many  benefits  are  taken  by  members  of 
the  working  class.  It  is  estimated  that  of  the 
books  opened  eighty  per  cent  fell  to  working- 
men  in  1895  and  eighty-five  per  cent  in  1896. 
Two  other  agencies  which  have  contributed  to 
the  popularity  of  this  department  are  the 
mutual  aid  societies,  and  the  pension  societies 
in   connection   with   the   public  schools.  ^ 


'  In  1898  less  than  half  the  funds  were  laid  out  in  govern- 
ment bonds. 


POSTAL  SAVINGS  IN  BELGIUM  367 

The  Belgian  system  has  gone  beyond  the 
EngUsh  in  providing  insurance, — even  to  the 
extent  of  providing  insurance  against  losses 
by  fire.  Such  a  proposal  would  be  very  re- 
pugnant to  the  American  conservatism,  but 
pubhc  sentiment  in  Belgium  is  very  different. 
In  practice  it  is  proving  much  more  popular 
than  the  life  insurance  department.  During 
the  year  1897,  6,873  policies  on  workingmen's 
dwellings  were  taken  out,  aggregating  more 
than  three  million  dollars  in  amount. 

The  regular  savings  department  has  been 
continuously  prosperous,  as  shown  by  the 
increased  proportion  of  the  people  who  pat- 
ronize it,  and  by  the  constantly  increasing 
volume  of  deposits.  ^ 

The  national  savings  bank  now  undertakes 

1  The  possibilities  of  growth  are  well  illustrated  by  a  com- 
parison of  the  years  1895  and  1896.  The  number  of  depositors 
per  1,000  of  population  increased  between  these  two  years 
from  125.86  to  137.6.  The  total  deposits,  which  amounted  to 
463,429,394  francs  in  1895,  had  increased  to  564,829,271  francs 
in  1898. 

The  savings  banks  emulate  the  English  example  in  the  mat- 
ter of  buying  and  selling  stocks  for  patrons,  but  there  were 
only  sixty -four  such  purchases  made  in  1897. 


368  SAVINGS    INSTITUTIONS 

the  patronage  of  the  co-operative  and  incor- 
porated credit  associations,  a  departure  which 
is  undertaken  with  the  distinct  purpose  of 
completing  the  circuit  between  saving  and 
spending.  In  this  way  the  state  is  able  to 
vitalize  the  co-operative  system  in  its  relation 
to  the  poorer  classes  of  patrons.  Usually 
co-operative  credit  depends  upon  co-operative 
saving,  i.  e.,  all  the  members  save  and  some 
of  them  borrow  from  the  common  hoard.  In 
Belgium  these  institutions  have  been  weak  in 
the  matter  of  saving,  partly  for  the  reason 
that  the  savings  of  the  people  have  been 
pretty  effectually  drained  off  by  the  state 
savings  bank,  and  the  problem  now  is,  how 
to  make  the  accumulation  which  is  collected 
by  the  state  serve  the  enterprise  of  poor  indi- 
viduals and  communities,  but  in  spite  of  efforts 
in  this  direction  the  problem  still  remains. 

Also  directly  affiliated  with  the  state  savings 
are  the  workingmen's  dwelling  and  building 
associations,  a  field  which  philanthropic 
thought  is  reluctant  to  abandon,  and  perhaps 


POSTAL  SAVINGS   IN  ITALY  369 

it  is  not  yet  time  for  its  abandonment  in  Bel- 
gium. At  all  events  recent  developments 
there  afford  some  slight  hope  to  persons  who 
still  cling  to  it.  1 

THE   ITALIAN    SYSTEM 

The  Belgian  type,  rather  than  the  EngHsh, 
was  followed  in  estabhshing  a  system  of  state 
savings  in  Italy,  where  the  project  was  pre- 
sented to  Parliament  in  1870;  but  action  was 
deferred,  owing  to  opposition  in  the  Senate, 
and  it  did  not  finally  become  a  law  until  1876. 

The  controlling  power  is  here  also  vested  in 
a  central  body,  denominated  the  Deposit  and 
Loan  Bank,  and  the  post-offices  act  only  as 
agents  for  it.  The  final  custody  and  adminis- 
tration of  the  funds  are  entirely  in  the  hands  of 

^  In  1898  there  were  120  of  this  class  of  institutions,  of  which 
number  9  were  co-operative,  an  encouraging  report  from  the 
fact  that  the  number  is  increasing,  there  having  been  onlj'^  91 
in  1896  and  only  88  in  1895.  On  the  other  hand,  the  fact  that 
so  few  of  them  are  co-operative  may  be  taken  as  an  unfavor- 
able sign,  as  indicating  a  lack  of  interest  on  the  part  of  mem- 
bers of  the  laboring  class. 

For  a  more  extended  description  of  the  Belgian  system,  see 
an  article  by  Dr.  W.  F.  Willoughby  in  the  Journal  of  Politi- 
cal Economy  for  March,  1900. 


370  SAVINGS    INSTITUTIONS 

the  Deposit  and  Loan  Bank,  which  is  required 
to  keep  them  invested,  with  the  exception  of 
a  reserve  sufficient  to  meet  calls  from  the 
post-office. 

But  in  the  matter  of  placing  funds  the 
regulations  follow,  in  the  main,  the  conserva- 
tive example  of  England.  However,  in  addi- 
tion to  the  public  debt  securities  and  Treasury- 
bonds,  accounts  current  with  the  Treasury  it- 
self, and  investments  in  the  bonds  of  the 
provinces  and  communes  are  allowed. 

In  fixing  the  rate  of  interest  to  be  paid  to 
depositors,  the  Italian  government  has  fol- 
lowed the  true  principle  of  savings  bank  man- 
agement, i.  e.,  the  rate  is  not  fixed  perma- 
nently, but  it  is  determined  from  time  to 
time  l)y  the  earning  power  of  the  deposits. 
Each  year  it  is  fixed  according  to  the  earning 
power  of  the  deposits  for  the  year  previous, 
by  a  conference  of  the  Ministers  of  Finance, 
Agriculture,  Industry,  Commerce,  and  Post 
and  Telegraph.  The  interest  rate  thus  deter- 
mined has  been  as  follows:  During  1876,  1877 


POSTAL   SAVINGS   IN   ITALY  371 

■and  1878,  it  was  three  per  cent;  from  1879  to 
1886  it  was  3.50  per  cent;  since  then,  it  has 
been  3.25  per  cent. 

Tlie  Itahan  pohcy  with  respect  to  the  small 
depositor  is  most  noteworthy.  The  objections 
noted  to  the  Belgian  system  in  this  regard 
were  avoided  by  the  Italian,  and  it  made  a 
very  decided  improvement  upon  both  its  pre- 
decessors. Large  accounts  as  well  as  small  are 
received  and  there  is  no  maximum  limit. 
There  is  however  a  maximum  limit  to  an  in- 
terest-bearing account.  An  account  will  bear 
interest  up  to  1,000  lire,  ^  and  every  account 
will  bear  interest  up  to  this  amount,  but  any 
excess  over  and  above  it  will  not  bear  interest. 
The  rate  of  deposit  is  thus  enhanced  by  the 
earnings  of  the  surplus  of  the  large  ones. 

The  maximum  amount  that  will  bear  inter- 
est, the  equivalent  of  less  than  $200  in  our 
money,  would  seem  to  be  small  to  an  Ameri- 
can.    But   the   standard    of    living  is   much 

1  A  lire  amounts  to  about  18  cents  in  United  States  money. 


372  SAVINGS    INSTITUTIONS 

lower — lower  even  than  that  in  Belgium,  and 
the  owner  of  a  1,000  hre  account  has  reached 
a  relatively  high  power  in  saving. 

The  growth  of  the  system  has  been  phe- 
nomenal. For  example  the  number  of  trans- 
actions each  year  increased  from  141,000  in 
1876  to  3,347,000  in  1889  and  to  about  five 
milMon  in  1900;  and  the  number  of  depositors 
per  1,000  of  population  increased  from  107  in 
1888  to  127  in  1900.  ^ 

The  agency  of  the  bank  in  the  purchase  of 
public  bonds  for  depositors  has  been  thoroughly 
active,  purchases  ranging  in  amount  about 
100,000,000  lire  per  year.  This  line  of  invest- 
ment may  be  more  attractive  in  Italy  because 
of  the  higher  rate  of  interest  on  state  securities. 

We  hear  the  usual  assurance  that  the 
postal  bank  does  not  interfere  with  other 
systems  ;  that  each  has  its  own  circle  of 
customers.     The  Minister  of  Posts  and  Tele- 

^  The  amount  due  depositors  increased  between  1898  and 
1900  from  554,868,540  lire  to  663,772,172  lire;  and  the  average 
account  also  increased  from  164.65  lire  to  166.22  lire. 


POSTAL   SAVINGS   IN   ITALY  373 

graph  says  "  The  apprehension  that  was  at 
first  felt  on  this  head  has  not  been  real- 
ized; one  does  not  interfere  with  the  other 
but  the  two  systems  often  exist  and  flour- 
ish side  by  side,"  and  he  cites  in  evidence, 
the  prosperity  of  the  old  and  firmly  estabhshed 
savings  bank  of  Lombardy  with  its  branches 
throughout  the  Kingdom. 

Latterly  all  savings  institutions  in  the 
kingdom  are  more  of  the  character  of  one  cor- 
related scheme  under  the  oversight  of  the  gov- 
ernment. As  in  England,  the  post-office  sys- 
tem was  not  meant  to  be  the  dominant  one  of 
the  country,  but  its  purpose  was  to  supply  the 
defects  of  the  other  agencies  for  stimulating 
savings.  But  while  the  English  purpose  failed 
of  its  realization  the  Itahan  seems  to  have 
succeeded ;  while  the  English  system  threat- 
ens now  to  monopolize  the  entire  field,  the 
Italian,  notwithstanding  the  fact  that  it  has 
many  fold  as  many  agencies  for  receiving  de- 
posits as  its  rivals,  receives,  in  fact,  only^about 
one-fourth  of  the  deposits  of  the  kingdom. 


374  SAVINGS    INSTITUTIONS 

The  reason  for  this  may  be  found  in  the 
peculiar  industrial  conditions  obtaining  in  the 
two  countries.  In  England,  there  is  a  sharper 
line  of  demarcation  between  the  wage-earn- 
ing class  and  the  capitalist  class ;  and  there  the 
capitahst  is  apt  to  be  a  man  of  great  wealth 
who  does  not  need  instruction  in  saving,  and 
who  has  no  occasion  for  co-operative  or  other 
aid  for  the  extension  of  his  credit.  The  wage- 
earner,  on  the  other  hand,  is  so  far  removed 
from  any  control  over  the  capital  which  he 
operates  that  he  scarcely  ever  thinks  of  be- 
coming himself  a  capitahst.  Therefore,  while 
he  has  much  more  need  than  liis  predecessor 
of  a  century  ago  to  learn  to  save,  he  has  no 
use  for  credit.  In  Italy  the  laborer  and  the 
capitahst  are  more  often  united  in  the  same 
person.  Here  is  the  home  of  the  small  man, 
of  the  small  merchant,  of  the  small  manu- 
facturer, of  the  small  proprietor,  and  of  the 
small  cultivator,  and  here  large  scale  industry 
has  taken  but  small  root.  And  the  chief  reason 
why  it  probably  will  not  become  a  country  of 


POSTAL   SAVINGS   IN   HOLLAND  375 

large  undertakings  is  found  in  the  fact  that 
its  development  has  been  so  largely  along 
semi-artistic  lines,  in  which  machinery  is  not 
extensively  used.  The  Italians  have  culti- 
vated a  trade  in  such  lines  as  glassware,  pot- 
tery, mosaics,  lace  work,  etc.,  which  require 
a  large  amount  of  hand  labor. 

The  extraordinary  money-loving  character- 
istic of  the  Itahan  people  is  another  support 
for  the  private  savings  banks.  The  higher  in- 
terest rate  afforded  by  them  will  usually  prove 
a  weightier  consideration  than  the  greater  se- 
curity afforded  by  the  government  banks. 
Here  the  greatest  advantage  lies  with  the  com- 
bined savings  and  credit  institutions, — the  pre- 
miums on  the  small  loans  to  the  small  under- 
taker supplying  larger  earning  power  than 
that  of  either  the  state  bank  or  the  ordinary 
trustee  bank. 

THE   HOLLAND   SYSTEM 

The  history  of  savings  banks  in  Holland 
prior  to  the  adoption  of  the  present  system 
was  a  stormy  and  disastrous  one.     The  com- 


376  SAVINGS    INSTITUTIONS 

mercial  mortalities  incident  to  the  deprecia- 
tion of  public  securities  in  1830,  1848  and 
1860  had  a  very  depressing  effect  upon 
them.  In  1870  their  number  was  so  far  de- 
pleted that  there  were  only  twenty-seven  in 
the  country,  to  a  population  of  four  million, 
and  the  business  done  by  these  was  very  small. 

A  report  to  the  "  Congres  International  des 
Institutions  de  Prevoyance^\  held  in  Paris  in 
1878,  ascribed  the  backward  development  to 
two  causes, — inaccessibility  of  the  banks  to 
the  people,  and  the  precariousness  of  the 
funds.  This  report  gave  rise  to  two  alterna- 
tive propositions  to  the  Chamhre  des  Deputes. 
One  proposed  to  render  the  existing  facilities 
more  accessible  by  offering  the  services  of  the 
post-offices  to  depositors  as  an  agency  of  con- 
veyance— following  the  unfruitful  example  of 
France.  The  other,  estabhshing  a  complete 
system  of  postal  savings  banks  was  adopted 
in  1879,  going  into  effect  in  the  following  year. 

The  plans  were  worked  out  in  detail  and 
with  great  care  by  Professor  Sassen,  the  pres- 


POSTAL   SAVINGS   IN   HOLLAND  377 

ent  director.  The  most  adaptable  feature  of 
the  EngHsh,  Belgian  and  Italian  systems  were 
joined  to  some  quite  original  ones. 

A  director,  whose  office  is  at  Amsterdam,  is 
the  managing  head  of  the  system,  and  he 
operates  under  the  general  superintendence  of 
a  Council  of  Administration,  of  which  the 
Minister  of  Commerce  and  Industry  is  a  mem- 
ber. And  the  Bank  of  the  Netherlands  under 
this  direction  administers  the  funds.  ^  An 
interesting  expedient,  designed  to  make  the 
postmasters  and  other  agencies  efficient  and 
vigilant  in  this  service,  is  added  in  the  allow- 
ance of  a  fee  of  five  cents  on  every  new  ac- 
count opened,  and  a  fee  of  one  and  a  half 
cents  for  every  entry  made  in  the  books. 

^Like  the  Belgian  system,  it  may  properly  be  called  a  Pos- 
tal Savings  Bank  only  in  that  the  post-offices  collect  deposits 
and  keep  the  books  with  the  individual  depositors,  for  the 
Department  has  nothing  further  to  do  with  them.  Neither 
does  it  have  all  the  work  of  collecting  and  paying  out  deposits, 
for  a  number  of  other  agents  are  commissioned  to  aid  in  this 
work. 

The  general  policy  adopted  by  England  and  Belgium  in  the 
matter  of  interest  rate  is  followed,  viz.,  it  does  not  vary  with 
the  earning  power  of  the  deposits  but  is  fixed.  The  uniform 
rate  is  3.64  per  cent,  and  interest  is  allowed  on  as  small  a  sum 
as  a  florin  (about  40  cts.  in  United  States  money). 


378  SAVINGS    INSTITUTIONS 

A  maximum  of  accessibility  and  convenience 
is  provided  by  allowing  patrons  who  reside  in 
the  country,  and  at  a  distance  of  more  than 
twenty  minutes  walk  from  an  authorized 
agency,  to  send  in  their  deposits  by  letter 
carrier. 

The  director  invests  the  funds,  under  the 
general  oversight  of  the  Council  of  Adminis- 
tration, in  a  wide  margin  of  securities.  Be- 
sides state  bonds,  municipal  securities,  the 
securities  of  railways  that  are  under  the  guar- 
antee of  the  state,  and  such  other  securities 
as  the  Netherland  Bank  will  accept,  are  per- 
mitted. But  the  relatively  wide  margin  of 
investment  does  not  seem  to  result  in  a  very 
high  rate  of  interest.  The  average  gross  earn- 
ings amount  to  only  3.36  per  cent.  ^  And  this 
low  rate  must  be  noted  also  in  connection  with 
the  adoption  of  the  Itahan  system  of  Hmiting 
the  amount  of  the  account  that  will  bear  in- 

^  The  cost  of  administration  was  .56  per  cent  in  1895.  The 
net  profits  are  applied  to  a  reserve  fund. 


POSTAL  SAVINGS  IN   HOLLAND  379 

terest,  but  allowing  the  accounts  to  reach  any 
amount.  ^ 

The  generous  privilege  allowed  by  the  Eng- 
lish system  permitting  withdrawals  at  other 
offices  than  the  one  in  which  the  deposit 
is  made,  and  by  post  or  wire  is  followed. 
But  the  limitation  upon  the  amount  of 
a  withdrawal  within  a  single  week  to 
twenty-five  florins,  without  a  special  permis- 
sion from  the  director,  seems  rather  severe. 
And  the  limitation  put  upon  a  single  deposit,, 
which  was  800  florins  and  is  now  1,200  florins^ 
seems  to  be  a  survival  of  a  method  of  exclud- 
ing the  better  conditioned  depositors,  which 
fails  of  a  sufficient  economic  warrant  under 
the  policy  of  discrimination  in  the  payment 
of  interest. 

The  extent  of  the  patronage  is  not  as  great 
as  the  general  reputation  of  the  Dutch  for 
frugality  and  thrift  would  lead  one  to  expect, 

1  The  maximum  interest-bearing  account  is  1,500  florins  in 
the  case  of  a  corporation.  A  florin  is  equal  to  about  forty  cents 
of  U.  S.  money. 


380  SA.VINGS   INSTITUTIONS 

but  the  rate  of  its  increase  is  an  eloquent  testi- 
mony to  the  valuable  service  rendered  by  the 
post-office  system.  In  1888  there  were  only 
forty-seven  depositors  to  the  1,000  of  the 
population,  but  the  proportion  had  grown  to 
138  by  the  close  of  1898,  and  to  161  by  the 
close  of  1900. 

In  estimating  the  present  condition  of 
the  saving  habit,  account  should  also  be 
taken  of  the  deposits  in  the  private  insti- 
tutions. These  seem  to  have  prospered  un- 
der the  rivalry  of  the  state  system.  They 
show  about  seventy  depositors  for  each  1,000 
of  the  population,  and  the  amount  of  their 
deposits  even  exceeds  that  of  the  post-office 
system.  But  the  exact  importance  that  should 
be  given  to  the  old  system  is  an  indetermin- 
able quantity.  The  fact  of  the  more  com- 
fortable condition  of  the  patrons  of  the  banks 
falling  to  this  class,  taken  in  connection  with 
the  fact  that  they  are,  for  the  most  part,  lim- 
ited liability  stock  companies,  suggests  a  doubt 
as  to  their  real  nature.     The  conclusion  that 


POSTAL   SAVINGS   IN   FRANCE  381 

they  are,  at  least  to  some  extent,  investment 
societies  rather  than  savings  banks  is  irre- 
sistible. 

THE   FRENCH   SYSTEM 

The  French  savings  institutions  comprise  to 
an  extraordinary  extent,  one  public  system. 
They  include  both  the  postal  and  the  non-postal 
banks — both  of  these  general  classes  are  in  a 
large  sense  government  institutions.  For, 
while  the  central  government  directly  operates 
only  the  postal  system,  it  prescribes  very 
difinite  rules  for  the  operation  of  the  others, 
and  until  recent  years  all  the  funds  of  each 
were  required  to  be  turned  into  the  ''  caisse 
des  depot  set  consignations,  a  government 
board  charged  with  the  investment  of  savings 
funds.  ^ 

They  are  both  brought  under  government 
limitations  in  the  matter  of  interest  and  of 
the  disposition  of  earnings ;  but  in  this  regard 

^  Since  August  5th,  1895,  the  non-postal  banks  have  been 
allowed,  with  the  consent  of  the  Minister  of  Commerce,  to 
retain  a  portion  for  independent  investment. 


382  SAVINGS    INSTITUTIONS 

some  favor  is  shown  to  the  non-postal  banks, 
since  the  caisse  allows  them  3^  per  cent,  al- 
though out  of  that,  they  are  required  to  pay 
their  expenses  and  to  provide  a  reserve  fund. 
The  remainder  may  be  disposed  of  in  the  form 
of  interest ;  and  they  are  generally  able  to  pay 
3  per  cent  while  in  the  post-office  banks,  the 
depositors  receive  only  2f  per  cent. 

Savings  banks  of  all  descriptions  come 
under  the  same  rule  as  to  the  maximum  limit 
for  accounts.  In  1851,  the  maximum  was 
fixed  at  1,000  francs  and  it  has  since  been 
several  times  changed,  having  stood  at  differ- 
ent times  at  2,000  francs,  3,000  francs,  while 
now  it  is  1,500  francs.  The  last  amount  was 
fixed  by  a  law  of  1895,  and  the  effect  upon 
the  saving  habit  has  been  depressing,  for  not- 
withstanding the  fact  that  amounts  in  excess 
of  the  legal  maximum  are  invested  by  the 
bank,  in  the  depositors'  names,  in  government 
securities,  the  total  business  transactions 
assigned  to  "  withdrawals  "  has  been  on  the 
increase. 


POSTAL  SAVINGS   IN  FRANCE  383 

As  usual,  the  facilities  afforded  by  the  post- 
office  system  are  very  superior.  At  the  close 
of  1896,  there  were  7,369  deposit  places,  while 
the  other  savings  banks  had  only  300  main 
offices  and  1,517  receiving  stations.^  But  in- 
stead of  absorbing  the  other  banks,  as  in  Eng- 
land, the  French  post-office  system,  like  the 
Italian,  is  said  to  have  stimulated  their  growth. 
A  decree  of  August  23d,  1873  had  sought  to 
reach  the  neglected  places  by  allowing  the 
banks  to  utilize  the  post-offices  in  the  collec- 
tion and  repayment  of  deposits,  but  conditions 
did  not  materially  improve  until  the  7,000 
post-offices  were  converted  into  savings  banks 
on  April  9th,  1881. 

It  may  be  worth  while  here  to  examine  into 
the  basis  of  the  claim  so  often  made  that  the 
system  in  use  prior  to  the  innovation  was 
strengthened  and  its  growth  stimulated  by 
the  rivalry  and  example  of  the  local  post- 
offices.  Certainly  the  facts  of  experience  dis- 
prove the  claim  sometimes  made  that  the  in- 

1  On  the  31st  of  December,  1900  there  were  7,697  postal 
banks. 


384  SAVINGS    INSTITUTIONS 

herent  advantages  of  a  state  system  insure  an 
ultimate  monopoly,  for  the  annual  deposits  in 
the  municipal  banks  increased  in  amount  from 
near  425,000,000  francs  in  1881,  the  year  of 
the  adoption  of  the  postal  system,  to  700,000,- 
000  francs  in  1898;  the  balance  due  to  depos- 
itors between  these  periods  increased  from 
1,408,903,000  francs  to  3,400,240,000  francs; 
the  number  of  books  in  circulation  increased 
from  4,199,000  to  6,877,000,  and  the  number 
of  books  for  every  1,000  of  population  in- 
creased from  114  to  179.  And  it  must  also  be 
noted  that  after  an  active  rivalry  of  fifteen 
years,  the  ordinary  savings  banks  could  still 
write  their  success  in  much  larger  figures  than 
their  rival.  Taking  the  year  1898  for  the 
purpose  of  comparison  we  find  that  the  aver- 
age accounts  stood  409  francs  against  283 
francs  in  favor  of  the  old  system;  a  like 
favorable  showing  is  made  in  the  number  of 
patrons  for  every  1,000  of  the  population, 
which  stood  179  against  80.  ^ 

^  The  postal  system  had  92  depositors  to  each  1,000  of  pop- 
ulation at  tlie  close  of  1900. 


POSTAL   SAVINGS   IN   FRANCE  385 

These  facts,  however,  do  not  warrant  a 
conclusion  that  the  new  principle  was  injected 
into  the  institutional  life  of  the  people  with- 
out any  shock  or  disturbance  to  the  existing 
system.  Other  facts  lead  to  quite  an  opposite 
conclusion.  While  there  was  not  any  violent 
disturbance,  there  was  certainly  a  decidedly 
appreciable  effect. 

The  first  of  these,  noted  in  the  course  of 
this  investigation,  is  an  appreciable  slackening 
in  the  rate  of  increase  in  the  number  of  books 
in  circulation  coincident  with  the  application 
of  the  new  system.  Between  the  years  1875 
and  1880,  the  number  of  books  per  1,000  of 
the  population  had  increased  from  65  to  104, 
or  there  was  an  absolute  gain  of  60  per  cent, 
while  in  the  next  five  years  the  progress  had 
reached  131  books  for  every  1,000  of  popula- 
tion, or  an  increase  of  only  25  per  cent,  A 
decided  slackening  in  the  increase  in  the  value 
of  the  annual  deposits  was  next  noted.  This 
had  been  from  150,000,000  francs  to  725,000,- 
000  francs  between  the  years  1872  and  1882, 


386  SAVINGS    INSTITUTIONS 

or  an  increase  of  350  per  cent.  In  the  decade 
1882-1892,  the  increase  was  from  725,000,000 
to  875,000,000  francs,  or  only  35  per  cent.  ^ 

The  effect  may  be  more  definitely  measured 
by  noting  the  slump  in  business  which  occurred 
after  the  post-ofifice  banks  had  completed  a 
second  year  of  experiment.  Between  the 
years  1881  and  1882,  presumably  before  a 
serious  rivalry  had  set  in,  the  deposits  in  the 
ordinary  savings  banks  had  increased  from 
about  450,000,000  francs  to  more  than  725,- 
000,000  francs,  while  in  the  year  following 
there  was  a  drop  to  about  630,000,000  francs.  ^ 

That  the  ordinary  savings  banks  have  not 
been  stimulated  in  their  growth  to  any  extra- 
ordinary degTee  is  further  shown  by  the  fact 

^  It  should  also  be  noted  that  the  value  of  the  annual  de- 
posits has  since  fallen  off  until  they  amounted  to  700,000,000 
francs  in  1898,  or  appreciably  less  than  the  point  reached  at 
the  time  of  the  adoption  of  the  postal  savings  bank  principle. 

"  The  figures  for  the  comparisons  are  chiefly  derived  from  a 
report  prepared  by  the  Miuistrj'  of  Commerce,  Industry  and 
Post  and  Telegraph  for  the  Paris  Expcjsition  of  1900,  under 
the  caption  "  Caisses  d'epargne  ordinaires"  .  .  .  "  L'his- 
torique  des  foundations  et  des  operatioss  sous  les  legislations 
successives  de  1818  a  1899. 


POSTAL   SAVINGS   IN   FRANCE  387 

that  they  still  do  not  begin  to  cover  the  terri- 
tory. The  north-eastern  portion  of  the  coun- 
try is  pretty  well  saturated  with  savings 
banks,  nine  departments  having  had  upwards 
of  fifty  each,  on  the  31st  of  December,  1898; 
but  about  half  of  all  the  departments  have 
less  than  ten  each,  and  eleven  have  four  or  less. 
The  pohcy  of  investing  the  funds  of  aU 
kinds  of  savings  banks  in  public  securities 
acts  in  France  as  a  powerful  support  to  the 
national  credit,  and  helps  to  explain  the  ease 
with  which  the  state  financiers  have  been  able 
to  manage  an  enormous  interest-bearing  debt. 
And  here  the  gain  of  the  state  has  proven  the 
loss  of  depositors,  for  it  has  caused  a  continu- 
ous rise  in  government  stock,  and  a  correspond- 
ing decrease  in  interest.  This  close  connection 
with  the  state  finances  also  makes  the  savings 
bank  extremely  sensitive  to  pohtical  senti- 
ments and  to  rumors  about  the  pubUc  credit. 
In  1893  rumors  as  to  the  safety  of  deposits, 
which  were  circulated  for  political  purposes, 
caused   a  sudden   crisis.     In    the    first    four 


388  SAVINGS   INSTITUTIONS 

months  of  that  year  withdrawals  exceeded 
deposits  by  35,000,000  francs,  and,  though 
confidence  was  soon  restored,  there  was  dur- 
ing the  year  21,250,000  francs  less  paid  in  than 
withdrawn.  ^ 

SWEDISH   SYSTEM 

A  closer  study  than  the  author  has  been  able 
to  give  to  the  situation  of  savings  banks  in 

^  The  following  table  from  the  official  report  will  show  how 
economically  the  affairs  of  the  post-office  bank  have  been  ad- 
ministered : 


Tear 

Amt.  due  depon'rs 
including  interest 

Cost  of  adminstra- 
tion 

Per  cent  of  amt. 
due  depositors 

1882. . 

.      47,601,688  frs. 

364,245 

0.76 

1883. . 

.      77,431,414 

481,036 

0.62 

1884. . 

.    115,403,034 

679,454 

0.58 

1885. . 

.     154,155,572 

869,437 

0.56 

1886.. 

.     190,674,127 

1,162,387 

0.61 

1887. . 

.    223,519,666 

1,254,719 

0.56 

1888. . 

.    266,788,602 

1,422,120 

0.53 

1889.. 

.    332,073,912 

1,630,117 

0.49 

1890. . 

.    413,439,048 

1,945,898 

0.47 

1891.. 

.    506,379,931 

2.555,548 

0.50 

1892. . 

.     616,363,425 

2,839,971 

0.46 

1893. . 

.    610,793,920 

3,158,059 

0.51 

1894. . 

.    690,844,460 

3,554,781 

0.51 

1895.. 

.    753,458,527 

3,429,094 

0.45 

1896.. 

.    784,950,207 

3,329,479 

0.42 

1897. . 

.    844,207,699 

3,412,589 

0.44 

1898. . 

875,021,387 

3,579,214 

0.41 

1899. . 

.    929,454,282 

3.643,274 

0.39 

1900.. 

.1,010,263,198 

3,865,883 

0.38 

POSTAL   SAVINGS   IN   SWEDEN  389 

Sweden  would  probably  reveal  points  of  strong 
resemblance  to  the  conditions  just  described  in 
France.  As  in  France,  the  state  system, 
which  was  adopted  in  1883  and  introduced  in 
1884,  found  the  territory  already  pretty  well 
pre-empted  by  another  system,  strong  and  vig- 
orous within  the  spheres  of  its  activity,  but 
inadequately  covering  the  territory. 

As  the  situation  had  been  in  France,  the  post- 
office  system  was  destined  to  a  constant  and 
thrifty  growth ;  but  it  was  not  destined  to  do 
more  than  supplement  the  work  already  being 
done.  It  appears  that  the  number  of  post- 
office  savings  bank  books  in  circulation  has 
been  substantially  increased  for  each  year 
since  the  beginning  of  the  system ;  the  num- 
ber per  1,000  inhabitants  having  increased 
from  17  in  1884  to  106  in  1898,  and  to  110  in 
1900;  likewise,  only  in  a  more  pronounced 
degree,  the  amount  due  depositors  has  in- 
creased. 1     But  the  idea  that  the  new  system 

1  The  amount  standing  to  the  credit  of  depositors  rose  from 
only  827,641  krouers  in  1884  to  64,033,595  in  1898,  and  to  78,- 
424,863  in  1900.     A  kroner  is  equal  to  about  24  cents. 


390  SAVINGS    INSTITUTIONS 

is  destined  to  supplement  rather  than  super- 
sede the  old,  seems  to  be  borne  out  by  the  fact 
of  the  great  preponderence  of  work  that  is 
still  done  by  the  latter  system  after  seventeen 
years  of  rivalry. 

In  order  to  find  available  statistics  for  a 
comparison  of  the  work  done  by  the  two  sys- 
tems, we  are  obliged  to  go  back  to  the  year 
1897,  when  we  find  the  advantage,  in  point 
of  facilities,  much  in  favor  of  the  new  sys- 
tem, but  in  point  of  volume  of  business  over- 
whelmingly on  the  side  of  the  old.  While 
there  are  3,958  post-offices  in  the  kingdom 
receiving  savings  deposits  against  only  375  ^ 
of  the  non- state  class,  there  were  only  535,306 
depositors  in  the  one  against  1,140,713  in  the 
other.  And  the  difference  in  the  respective 
activities  is  further  emphasized  by  the  fact 
that  the  amount  due  depositors  was  68,107,000 
kroners  in  the  one  against  383,582,000  kroners 
in  the  other.     The  ground  has  been  thus  well 

1  Of  these  101  were  in  the  towns  and  274  were  in  the  coun- 
try communities. 


POSTAL   SAVINGS   IN   AUSTRIA  391 

maintained  despite  the  fact  that  the  govern- 
ment has  pursued  a  very  Uberal  pohcy  with 
respect  to  the  interest  paid  to  depositors  in 
the  post-office  system.  A  rate  of  3.6  per  cent 
was  paid  before  so  much  could  be  earned,  over 
and  above  expenses,  the  cost  of  administration 
being  paid  out  of  the  Pubhc  Treasury.  ^  And 
this  high  rate  has  since  been  supported  by  a 
hberal  poHcy  with  respect  to  investments, 
municipal  and  other  public  securities  being 
allowed  in  addition  to  state  bonds. 

THE    AUSTRIAN    SYSTEM 

The  most  radical  experiment  in  postal  sav- 
ings banks  was  made  by  Austria.  In  one 
year  after  the  adoption  of  the  conventional 
form  (in  1883),  a  check  department  was 
added.  This  feature  may  find  its  warrant 
as  an  additional  attraction  to  induce  a 
larger  volume  of  legitimate  savings  bank 
patronage,  but  it  evinces  a  willingness  to  be- 
come, at  least  incidentally,  a  rival  for  some  of 

'  Since  1898,  both  interest  and  expenses  have  been  paid  out 
of  the  earnings. 


392  SAVINGS    INSTITUTIONS 

the  patronage  of  commercial  banks.  It  would 
doubtless  prove  an  attractive  convenience  to 
the  average  savings  bank  depositor  if  he  could 
always  have  his  acccount  within  immediate 
call,  and  be  able  to  invest  it  by  means  of  checks. 
The  latter  convenience  saves  the  trouble  of  call- 
ing at  the  bank,  and  the  checks  serve  as  conven- 
ient memoranda  of  payments,  of  the  nature  of 
receipts.  But  these  advantages  are  more  than 
offset  by  the  lower  interest  rate  which  the 
check  account  is  able  to  earn. 

The  regular  savings  department  and  the 
check  department  are  kept  entirely  separate, 
and  each  has  its  appropriate  policy.  The 
one,  operated  under  the  usual  restrictions, 
earns  three  per  cent  for  its  depositors, 
while  the  other,  with  its  freedom  of  with- 
drawal, yields  only  two  per  cent.  And  this 
difference  in  earning  power  doubtless  ac- 
counts for  the  fact  that  the  old  system  contin- 
ues to  attract  by  far  the  greater  amount  of 
patronage.  ^     At  the  end    of    the   year   1900 

^  llarulausgahe  der  osterreichen  Oesetze  und  Verordnungen,  99 
Ileft.     Druk  und  Verlag  der  k.  k.  Hof-und  Staatadruckerei. 


POSTAL   SAVINGS   IN   AUSTRIA  393 

there  were  1,484,607  depositors  with  accounts 
in  this  department  against  only  42,658  in  the 
check  department.  In  point  of  volume  of 
business,  however,  the  account  stands  the 
other  way.  In  the  savings  department,  the 
number  of  transactions  was  3,452,500,  aggre- 
gating in  amount  about  97,425,000  florins, 
while  in  the  check  department  the  number  of 
transactions  reached  21,721,223,  and  they 
amounted  to  about  5,206,465,000  florins. 

The  regular  savings  bank  seems  to  reach 
the  classes  most  desired,  for,  while  all  classes 
of  people  are  included  among  the  patrons, 
more  than  half  the  depositors  are  under 
twenty  years  of  age,  and  the  pupil  and  stu- 
dent class  have  twenty-nine  per  cent  of  the 
total.  The  class  including  artisans,  hand 
laborers  and  apprentices,  is  the  next  highest, 
having  thirteen  per  cent ;  and  small  children 
comprise  12.47  per  cent  of  the  total. 

The  value  of  the  Austrian  bank  is  found 
rather  in  its  form  and  possibiUties  than  in  its 
achievement,   for    the    results    are  still  low. 


394  SAVINGS    INSTITUTIONS 

Only  73  persons  out  of  every  1,000  of  the 
inhabitants  were  depositors  in  both  depart- 
ments in  1900.  The  effectiveness  of  the  work, 
however,  is  shown  in  a  continuous  increase, 
each  year  witnessing  a  net  gain. 

The  check  department  has  a  separate  set  of 
books,  and  also  a  separate  set  of  clerks  and 
book-keepers,  where  the  business  is  large 
enough  to  justify  it.  It  also  appeals  to 
another  class  of  persons,  and  it  cannot  in 
strictness  be  called  a  savings  bank  in  the  tra- 
ditional sense  of  the  term.  The  usual  rules 
and  restrictions  which  apply  to  the  regular 
savings  department,  as  the  maximum  of  1,000 
florins  for  deposit  accounts,  and  the  require- 
ment of  a  notice  of  two  weeks  before  with- 
drawing an  entire  account,  do  not  apply  to  it. 
The  depositor  is  not  hampered  by  such  restric- 
tions, and  he  may  even  draw  a  single  check 
for  as  large  a  sum  as  10,000  florins.  The 
element  of  an  interest  payment,  and  the  ele- 
ment of  perfect  security  of  deposits  are  the 
only  features  of  regular  savings  banks  that 


POSTAL  SAVINGS  IN   AUSTRIA  395 

are  retained.  These  advantages  are  sufficient, 
however,  with  an  increasing  number,  to  coun- 
terbalance the  advantage  offered  by  a  com- 
mercial bank.  The  large  majority  of  the 
patrons  of  this  department  belong  to  the  mer- 
chant or  the  manufacturing  classes;  it  may 
be  fair  to  assume  that  the  greater  part  of  these 
would  go  to  the  commercial  banks  if  the  check 
department  had  not  been  added  to  the  postal 
savings  system,  and  the  fact  that  the  average 
account  in  1897  amounted  to  2,590  florins 
seems  to  bear  out  this  assumption. 

It  is  borne  out  also  by  the  sharp  contrast  be- 
tween this  average  and  the  size  of  the  greater 
number  of  accounts  in  the  regular  savings  de- 
partment. For  the  purpose  of  this  comparison 
the  classification  found  in  the  official  report  is 
very  satisfactory.  In  1897,  the  accounts  and 
the  amounts  were  distributed  as  to  percent- 
ages of  the  whole  as  follows : 

WitJdn..  Ifl.      ifl.    |fl.  /sfl.  U^.  ^"^fl.  iggfl.  f|§fl.  T^o^fl. 

Acct 29.23  16.79  6.26  8.9119.78    7.11     5.50    4.38    2.04 

Amt....  0.45    0.56  0.47  1.28  10.15  10.63  15.96  28.37  32.13 

A  majority  of  aU  the  depositors,  it  appears, 


396  SAVINGS    INSTITUTIONS 

have  accounts  ranging  under  ten  florins  in 
amount;  and  the  demand  for  accounts  ap- 
proaching the  maximum  allowed  is  relatively 
small. 

It  appears,  however,  from  a  closer  classifi- 
cation of  the  deposits  and  withdrawals  in  the 
check  department,  that  there  are  not  many 
very  large  customers.  In  1897  there  were 
13,224,311  individual  deposits  made,  and  of 
these  21.30  per  cent  were  under  five  florins  in 
amount.  The  class  which  includes  deposits 
ranging  between  five  and  fifty  florins,  which 
is  40.50  per  cent  of  the  total,  might  however 
include  many  small  merchants.  And  the  fact 
that  several  million  deposits  were  in  amounts 
ranging  upwards  of  150  florins,  several  thous- 
and even  ranging  between  10,000  and  40,000, 
seems  to  indicate  that  this  department  has 
made  at  least  a  healthy  beginning  among  the 
more  opulent  classes  of  business  people.  ^ 

^  The  number  of  deposits  in  the  check  department  were 
divided  in  1897  according  to  the  amount  of  the  deposits  desig- 
nated in  florins  as  follows: 


POSTAL  SAVINGS   IN   AUSTRIA  397 

The  record  as  to  the  payment  of  checks 
seems  also  to  bear  out  this  view.  The  very- 
small  withdrawals  amount  to  only  QA  per  cent 
of  the  whole,  while  thirty-one  per  cent  of  them 
range  between  five  and  fifty  florins,  and 
twenty-two  per  cent  between  fifty  and  150. 
And  the  number  of  \'ery  large  checks,  quite 
a  number  exceeding  5,000  fiorins  in  amount, 
makes  it  evident  that  many  large  exchanges 
are  effected  through  this  medium.  ^ 

Per  cent  of  total 

Total  number  of  deposits 13,224,311  21.30 

From  5  to  50 5,364,306  40.50 

From  50  to  150 2,568,785  19.40 

From  150  to  300 1,164,100  8.80 

From  300  to  500 521,084  3.96 

From  500  to  1,000 352,219  2.60 

From  1,000  to  2,000 175,182  1.30 

From  2,000  to  3,000 50,975  .30 

From  3,000  to  4,000 30,007  .20 

From  4,000  to  5,000 22,356  .16 

Fi-om  5,000  to  10,000 19,299  .14 

From  10,000  to  20,000 3,622  .027 

From  20,000  to  30,000 541  .0004 

From  30,000  to  40,000 311  .0002 

Over  40,000 321  .0002 

2  No.  of  checks  paid  according  to  the  amomits  as  designated 
in  florins  in  1897  was: 

P€V  C€7lt  of  totO/L 

Total  number  of  checks  paid 2,272,803  6.04 

Amounting  to  5  florins 210,064  31 


398  SAVINGS    INSTITUTIONS 

That  there  is  a  demand  for  this  department 
is  evidenced  by  its  constant  increase  in  pat- 
ronage. Such  a  radical  innovation  upon  es- 
tablished customs  might  be  expected  to  be  of 
slow  growth,  for  it  should  be  borne  in  mind 
that  it  was  designed  for  the  small  tradesman 
who  would  not  be  apt  to  patronize  a  commer- 
cial bank,  and  that  this  class  might  feel  more 
inclined  to  take  advantage  of  the  larger  inter- 
est rate  paid  by  the  regular  savings  depart- 
ment. To  understand  how  this  might  be  we 
need  to  recall  the  fact  that  the  checking  habit 
is  not  nearly  so  highly  developed  in  Austria, 
nor  elsewhere  on  the  Continent,  as  it  is  in  the 
United  States.  The  habit  of  keeping  enough 
cash  on  hand  to  pay  current  expenses  and  of 

From  5  to  50 1,016,557  32.3 

From  50  to  150 780,113  12.8 

From  150  to  300 421 ,582  7.86 

From  300  to  500 257,629  8.1 

From  500  to  1,000 266,411  5 

From  1,000  to  2,000 166,760  2 

From  2,000  to  3,000 66,146  1 

From  3,000  to  4,000 35,693  1 

From  4,000  to  5,000 32,277  2. 1 

From  5,000  to  10,000 69,571 


POSTAL  SAVINGS   IN  AUSTRIA  399 

giving  and  receiving  receipts  obtains  to  a 
much  greater  extent.  Moreover,  the  small 
tradesman  does  not  greatly  feel  the  need  of 
the  checking  privileges ;  he  pursues  his  calling 
at  a  leisurely  pace,  and  usually  has  ample 
time  to  make  his  daily  visit  to  the  bank. 
And  in  fact  about  the  only  attraction  to  the 
very  small  tradesman  is  the  advantage  of  a 
convenient  daily  deposit  of  the  earnings  of 
his  business  and  of  a  place  from  which  it  can 
be  withdrawn  whenever  needed,  in  such 
amounts  as  may  be  desired. 

The  growth  of  the  department  was  slow  at 
the  start.  There  were  only  176  accounts 
opened  in  1883,  but  the  number  leaped  into 
the  thousands  the  next  year,  and  by  the  next 
year  there  were  4,717  new  accounts  opened 
and  the  increase  of  patronage  has  proceeded 
at  a  satisfactory  rate  since. 

The  progressive  spirit  is  further  shown  in  the 
wide  margin  permitted  in  the  matter  of  invest- 
ment of  funds,  as  loans  to  banks  upon  short 
time,  to  individuals  or  corporations  upon  the  de- 


400  SAVINGS    INSTITUTIONS 

posit  of  Imperial  and  State  coupons,  lottery 
stocks  and  drawings  in  the  state  lottery,  dis- 
counts of  exchange  under  certain  restrictions, 
and  all  Austrian  securities  which  the  Austro- 
Hungarian  Bank  is  permitted  to  accept.  It  is 
further  shown  in  the  avowed  policy  of  a  low  re- 
serve,— usually  five  per  cent  of  the  total  depos- 
its, and  it  is  never  permitted  to  exceed  2,000,- 
000  florins. 

The  policy  of  keeping  secret  the  standing  of 
depositors  with  the  banks,  generally  observed, 
is  even  carried  to  the  extent  of  exempting 
interest  on  deposits  from  the  operation  of  the 
income  tax. 

The  general  policy  is  determined  and  a  gen- 
eral control  is  exercised  by  authorities  exter- 
nal to  the  Post- Office  Department,  which  ad- 
ministers the  affairs  subject  to  the  direction  of 
the  Ministers  of  the  Interior,  of  Commerce 
and  of  Finance.  ^ 

'  The  first  predecessor  of  the  postal  savings  bank  in  Austria 
was  founded  by  private  philanthropy  in  Vienna  in  1819.  In 
18M,  state!  api)roval  and  a  giiarantee  against  losses  were  re- 
quired before  a  savings  bank  could  be  established. 


POSTAL   SAVINGS   IN   AUSTRIA  401 

It  is  proper  to  inquire  if  this  unique  co-ordi- 
nation of  departments  is  a  spurious  or  a 
legitimate  offspring  of  the  savings  bank  prin- 
ciple. Since  the  principle  of  the  savings  bank 
is  sometimes  attached  to  a  commercial  bank 
to  further  the  commercial  interest,  may  the 
savings  bank  likewise  employ  a  method  of 
commercial  banks  to  further  the  savings  in- 
terest ?  It  may  be  said  that  the  check  de- 
partment affords  little  advantage  to  the  great 
mass  of  savings  bank  depositors,  save  as 
offering  a  transition  from  the  habit  of  elemen- 
tary saving  to  the  habit  of  quasi  commercial 
transactions.  It  is  not  designed  to  increase 
the  interest  rate  in  the  other  department,  and 
it  does  not  seem  to  materially  change  its 
clientele. 

There  may  be  three  classes  of  persons  who 
would  find  the  check  department  the  more 
attractive  of  the  two.  The  first  is  a  class  of 
merchants  and  business  men  who  habitually 
use  checks  in  their  business  and  who  would 
not  use  the  regular  savings  bank  at  all.     With 


402  SAVINGS    INSTITUTIONS 

the  same  checking  facihties  afforded  by  com- 
mercial banks,  with  a  security  of  deposits, 
which  a  commercial  bank  cannot  afford,  and 
an  interest  sum,  which  could  not  be  realized 
in  a  commercial  bank,  they  find  a  preponder- 
ence  of  advantages  in  using  this  department. 
The  second  class  consists  of  small  trades 
people  who  would  put  their  money  in  the 
regular  savings  bank — if  there  were  no  check- 
ing department — and  suffer  the  inconvenience 
of  going  to  bank  for  their  money  and  abide 
by  the  restrictions  as  to  removal,  for  the  sake 
of  the  interest  rate ;  the  advantages  of  check- 
ing and  of  immediate  control  over  their  ac- 
counts would  outweigh  the  attractiveness  of 
the  larger  interest  rate.  But  this  class  is 
already  well  grounded  in  economic  foresight, 
and  it  may  be  a  question  if  the  savings  bank 
should  make  an  especial  effort  to  facilitate  fur- 
ther advance.  To  some  extent,  however,  the 
change  to  the  checking  department  may  re- 
heve  the  regular  savings  department  to  its 
advantage. 


POSTAL  SAVINGS  IN  AUSTRIA  403 

The  third  class  consists  of  persons  who 
care  nothing  about  the  checking  privileges, 
but  who  care  a  great  deal  about  having 
their  money  within  easy  call.  They  might 
be  persuaded  to  put  their  money  in  bank, 
if  they  could  have  it  at  will,  but  their  pow- 
ers of  self-restraint  are  too  weak  for  them 
to  consent  to  see  their  savings  locked  up  from 
them  for  any  period  of  time.  While  the  de- 
positors in  this  class  would  often  have  such 
small  accounts  that  they  could  be  had  from 
the  regular  savings  bank  without  notice,  there 
must  be  a  considerable  number  of  persons, 
uninitiated  in  the  advantages  of  a  savings 
bank,  who  hoard  their  savings  about  their 
homes,  who  would  be  more  apt  to  take  the 
first  step  if  their  money  could  be  taken  out  at 
a  moment's  notice.  And  this  class  constitutes 
an  increment  of  real  gain  to  savings  culture 
by  the  addition  of  a  check  department. 

It  would  seem  from  this  brief  analysis  that 
a  check  system  as  a  co-ordinate  part  of  a  sav- 
ings bank  scheme  is  not  of  great  importance 


404  SAVINGS    INSTITUTIONS 

from  the  standpoint  of  savings  culture.  Very- 
much  might  be  said  in  favor  of  it  in  the  event 
of  its  merging  from  a  co-ordinate  into  an  in- 
tegral part  of  the  scheme,  a  subject  which  is 
discussed  in  another  part  of  this  essay. 

HUNGARY 

The  Austrian  experiment,  although  in  suc- 
cessful operation  for  sixteen  years,  does  not 
seem  to  have  excited  any  spirit  of  emulation 
in  postal  savings  bank  countries  outside  of  the 
Austro-Hungarian  Empire.  It  was  followed, 
however,  by  Hungary,  which  adopted  the  check 
feature  as  soon  as  the  regular  savings  bank 
was  fairly  established.  ^ 

In  fixing  the  interest  rate,  Hungary  followed 
the  Swedish  custom  of  making  the  rate  3.6 
per  cent  without  closely  regarding  the  earning 
power  of  the  money.  The  country  stood 
ready  to  bear  the  cost  of  administration  dur- 
ing the  experimental  stage.  This  principle  is 
adverted  to  here  for  the  purpose  of  noting  a 

^  The  regular  savings  bank  was  established  in  connection 
"with  the  post-office  in  1886. 


POSTAL    SAVINGS   IN   RUSSIA  405 

certain  advantage  which  it  contains  from  the 
standpoint  of  administration.  The  deficit  on 
account  of  the  cost  of  administration  affords 
a  definite  object  for  improvements  in  admin- 
istrative methods.  At  first  all  but  13.9  per 
cent  of  the  cost  of  administration  was  paid 
out  of  the  public  treasury,  but  steady  progress 
was  made  until  in  1890  the  earnings  of  the 
deposits,  over  and  above  the  interest  payments, 
covered  80,4  per  cent  of  the  cost  of  adminis- 
tration ;  and  in  the  year  following  there  began 
to  be  a  surplus,  which  was  applied  to  the  re- 
coupment of  the  Treasury  for  the  amounts 
previously  advanced. 

RUSSIA 

Russia  has  had  a  singular  history  in  connec- 
tion with  state  savings  banks ;  for  she  was  per- 
haps the  first  to  introduce  the  system,  and  she 
was  the  last  to  fall  into  the  line  of  postal  sav- 
ings bank  states.  As  far  back  as  1841  state 
savings  banks  were  estabhshed,  but  the  man- 
agement, by^^later  decrees  was  assigned  to  de- 
posit banks  of  St.   Petersburg  and  Moscow, 


406  SAVINGS    INSTITUTIONS 

and  to  benevolent  societies.  The  Post-Office 
Department  was  not  called  into  the  service  of 
fostering  the  savings  habit  until  1889. 

The  nucleus  of  the  present  system  was  the 
savings  department  of  the  Imperial  Bank, 
whose  facilities  were  extended  to  local  post- 
offices,  when  there  was  an  evident  need  of  it, 
and  the  system  has  never  become  co-extensive 
with  the  branches  of  the  post-office  system. 
It  is  operated  under  rules  formulated  by  the 
Minister  of  the  Interior  and  approved  by  the 
Minister  of  Finance  and  the  Imperial  Comp- 
troller. It  has  been  deemed  expedient,  as  in 
Holland,  to  stimulate  the  officials  by  a  system 
of  special  fees — as  ten  kopecks  for  each  new 
account  opened,  and  a  hke  sum  for  each  de- 
posit of  one  hundred  rubles  that  has  remained 
open  during  the  entire  year.  In  the  year 
1900  there  was  on  deposit  an  equivalent  of 
about  $320,000,000  in  United  States  money, 
which  belonged  to  3,172,858  depositors.  That 
would  make  about  one  depositor  to  every  43 
of  the  population. 


POSTAL   SAVINGS   IN   RUSSIA  407 

The  Grand  Duchy  of  Finland  preceded  the 
Imperial  Government  in  this  step  by  three 
years,  placing  the  management  in  the  hands 
of  a  directory  consisting  of  the  Post- Master 
General  and  two  colleagues.  The  earnings 
over  and  above  the  stated  interest  are  con- 
verted into  the  public  Treasury. 

The  history  of  Continnental  postal  savings 
banks  may  be  characterized  as  a  history  of 
experiments.  And  we  may  enumerate  among 
the  results:  control  exclusively  by  the  Post- 
Office  Department,  as  in  France;  control  by 
other  departments  of  the  government  as  in 
Belgium,  Holland  and  Russia ;  the  principle  of 
a  graduated  interest  charged,  and  of  a  maxi- 
mum interest-bearing  account,  as  in  Belgium, 
Italy  and  Holland;  the  check  system,  as  in 
Austria  and  Hungary ;  the  principle  of  fees  to 
induce  extra  endeavor  on  the  part  of  em- 
ployees, as  in  Holland,  Finnland  and  Russia ; 
and  the  principle  of  co-operation  with  popular 
loan  associations,  as  in  Belgium  and  Italy. 

No  comparison  of  the  results  of  these  differ- 


408  SAVINGS    INSTITUTIONS 

ent  principles  and  methods  is  feasible  because 
they  exist  in  such  combinations  that  their  re- 
spective results  cannot  be  separated.  And 
even  if  this  were  feasible  the  variety  of  con- 
ditions existing  among  the  different  peoples 
would  render  satisfactory  conclusions  impos- 
sible. They  must  each  be  judged  upon  the 
basis  of  their  evident  reasonableness. 

At  least  this  much  may  be  said — that  none 
of  them  have  been  vicious  enough  to  prevent 
the  success  of  the  general  scheme  to  which 
they  were  united,  for  postal  savings  banks  in 
Europe  have  been  universally  successful,  and 
their  success  has  been  at  once  so  pronounced 
and  so  conspicuous  as  to  convert  all,  among  the 
larger  countries,  save  Germany,  to  the  adop- 
tion of  the  principle. 


CHAPTER  XII 

POSTAL    SAVINGS    BANKS    IN    OTHER  COUNTRIES 

The  leaven  of  postal  savings  bank  influence 
extends  now  to  every  continent  and  to  every 
race  of  civilized  people.  It  would  not  be  safe 
to  conclude,  however,  that  the  principle  has 
been  adopted  in  every  instance  because  of  the 
urgency  of  local  conditions.  In  some  in- 
stances the  step  is  probably  ill-advised,  in  oth- 
ers, it  is  doubtless  timely,  while  in  several,  it 
may  be  safe  to  say  that,  if  the  hour  of  great 
need  is  not  yet  arrived,  the  time  of  large  ser- 
vice will  come,  and  there  is  at  least  no  harm  in 
being  ready  for  it. 

CANADA 

The  history  of  postal  savings  in  Canada  is 
of  especial  interest  to  citizens  of  the  United 
States  because  of  the  similarity  of  the  condi- 
tions obtaining  in  the  two  countries.  The 
things  which  are  foreboded  of  a  postal  savings 

(409) 


410  SAVINGS    INSTITUTIONS 

institution,  if  adopted  in  America,  may,  to 
some  extent,  be  looked  for  in  the  Dominion 
across  the  border;  and  perhaps  the  conditions 
are  as  favorable  as  they  ever  are  for  judging 
of  the  probable  effects  in  one  country  by  the 
result  of  experience  in  another. 

At  the  outset,  however,  certain  marked 
differences  should  be  noted. 

In  the  first  place,  there  is  not  the  same  need 
for  a  savings  bank  of  this  type  in  both  coun- 
tries. The  need  is  and  has  been  much  greater 
in  the  states ;  the  fact  that  Canada  followed  so 
quickly  the  example  of  the  mother  country 
cannot  be  accounted  for  on  the  ground  of  an 
extraordinary  urgency.  The  conditions  in  the 
states  were  much  more  urgent,  for  industrial 
life  here  has  been  much  more  like  that  of  the 
mother  country  than  has  that  of  Canada.  Nat- 
ural resources,  a  favoring  climate,  and  a  fav- 
oring national  policy  have  all  combined  to  in- 
spire the  entrepreneur  spirit  with  great  energy, 
and  our  industrial^organization  has  assumed 
proportions  and  structural  complexities  which 


POSTAL  SAVINGS   BANKS  IN   CANADA       411 

have  given  us  many  of  the  social  and  indus- 
trial problems  which  have  long  been  familiar 
to  England, — and  some  additional  ones  which 
are  peculiar  to  our  own  situations.  Canada 
has,  in  the  nature  of  things,  been  less  of  a 
manufacturing  country,  and  she  has  seen 
much  less  of  the  speculative  spirit. 

If  other  things  were  equal  the  conditions 
would  be  less  urgent  in  Canada  because  of  her 
very  superior  system  of  commercial  banks. 
Mr.  B.  E.  Walker,  who  is  President  of  the 
Canadian  Bankers'  Association,  describes  the 
branch  system  as  enabling  "  every  town  of 
1,000  or  1,200  people  to  have  a  joint  stock 
bank  with  a  power  behind  it  generally  twenty 
to  fifty  times  greater  than  such  a  bank  as  is 
found  in  a  town  of  similar  size  in  the  United 
States  would  have. ' '  The  savings  bank  de- 
partment of  an  institution  so  pervasive,  and 
at  the  same  time  of  such  strength  of  credit, 
offers  a  far  better  scheme  of  savings  facihties 
without  the  post-office  system  than  the  United 
States  possesses  with  the  trustee  system,  and 


412  SAVINGS   INSTITUTIONS 

almost  as  good  as  those  of  the  countries  of 
Europe  which  are  the  most  highly  favored 
with  the  different  types  of  savings  banks. 
But  this  condition  must  be  accounted  for  as  a 
result  of  the  post-office  system  which  might 
not  continue  if  the  latter  were  discontinued. 
The  system  of  public  savings  banks  was  in 
operation  in  Canada,  mostly  in  the  maritime 
provinces,  prior  to  the  introduction  of  the 
post-office  system.  The  post-office  system 
was  introduced  in  1867,  following  upon  some 
heavy  bank  failures.  At  first  banks  of  this 
class  were  opened  only  in  Ontario,  leaving  the 
two  state  systems  with  more  or  less  distinct 
spheres  of  activity — and  it  was  not  until  1885 
that  the  post-offices  in  the  maritime  provinces 
were  authorized  to  receive  deposits.  The 
other  system  is  now  definitely  on  the  way  to 
absorption — as  rapidly  as  an  agency  of  one 
of  the  Government  Banks  becomes  vacant 
through  death  or  retirement  the  funds  are 
taken  over  by  the  post-office.  The  accounts 
in^the  two  systems  were  in  1896  distributed 


POSTAL   SAVINGS   BANKS   IN   CANADA      413 

as  follows:  Government  Banks  $17,866,388,  in 
Post-Office  Savings  Banks  $28,932,929.  In 
the  former  class  there  were  35  offices  against 
755  in  the  latter. 

In  point  of  total  progress,  according  to  the 
usual  tests,  Canada  does  not  compare  very 
favorably  with  the  other  leading  postal  savings 
countries.  With  the  exception  of  the  King- 
dom of  Hungary  no  other  great  postal  savings 
country  presents  so  poor  a  showing  as  to  the 
proportion  of  the  population  who  patronize 
the  banks.  For  every  1,000  of  population 
there  were  estimated  at  the  beginning  of  1896  to 
be  only  twenty-five  postal  savings  depositors. 

Another  unfavorable  indication  is  the  size 
of  the  individual  accounts,  which  indicates 
a  well-to-do  rather  than  a  working  class 
patronage.  The  average  account  is  about 
$233,  or  about  three  times  as  large  as  the 
average  for  England,  Belgium  and  France, 
and  the  difference  is  greater  for  the  other 
countries. 

The  organization  and  the  rules  for  the  man- 


414  SAVINGS    INSTITUTIONS 

agement  are  somewhat  peculiar  and  in  some 
respects  inferior  to  that  of  other  postal  sav- 
ings systems. 

The  want  of  a  sufficient  local  automy  is  one, 
for  the  local  officers  have  only  a  perfunctory 
office  to  perform,  and  they  are  not  even  the 
fully  trusted  agents  of  the  government.  If 
a  deposit  is  made  at  a  local  office  the  amount 
is  transmitted  to  the  Treasury  Department 
and  the  depositor  must  wait  until  return  of 
post  before  he  receives  a  certificate  of  deposit, 
and  it  is  not  really  deposited  until  it  arrives 
at  the  Treasury.  And  if  it  is  stolen  or  em- 
bezzled while  in  the  hands  of  the  local  agent, 
the  loss  falls  on  the  depositor. 
'  The  inconvenience  attending  withdrawals 
is  even  greater,  for  notice  must  be  left  at  the 
local  office  and  the  applicant  must  wait  for 
two  or  three  days  until  the  application  has 
reached  the  Treasury,  and  has  been  acted  up- 
on and  a  check  for  the  amount  has  been  re- 
turned. The  check  is  cashed  at  the  nearest 
bank.      Another  criticism  is  made  upon  the 


POSTAL  SAVINGS  BANKS   IN  CANADA      415 

relation  which  subsists  between  the  depositor 
and  the  government.  In  the  original  law  it 
was  provided  that  the  deposits  should  be  in- 
vested in  Dominion  securities.  But  in  1875 
this  was  repealed  and  it  is  now  simply  pro- 
vided that  deposits  should  be  handed  over  to 
the  Eeceiver- General,  and  that  any  with- 
drawals should  be  paid  by  him.  Mr.  R.  Gill 
says  of  this  arrangement : 

"  It  cannot  be  contended  that  it  is  proper  or 
comfortable  for  a  country  having  annual 
revenue  and  expenditure,  which  it  is  at  least 
sometimes  a  strain  to  make  balance  each  other, 
....  to  have  an  unfunded,  or,  to  use  a  more 
famihar  term,  '  floating '  indebtedness  of 
forty-seven  millions  payable  on  demand,  with 
absolutely  no  provision  to  meet  any  consider- 
able portion  of  it,  even  though  the  creditors 
who  hold  that  indebtedness  be  many  in  num- 
ber and  of  its  own  people. ' '  ^ 

The  high  rate  paid  is  still  another  subject  of 
criticism.  The  interest  paid  to  depositors  has 
been  successively  lowered  from  four  per  cent 
to  three  and  one-half  per  cent,  and  finally,  in 

^  In  article  on  Postal  Savings  Banks,  Journal  of  Canadian 
Bankers'  Association,  July,  1898. 


416  SA.VINGS  INSTITUTIONS 

1897  to  three  per  cent.  While  the  government 
was  paying  the  depositors  three  and  one-half  per 
cent,  or  about  3.40  per  cent,  allowing  for  the 
time  after  deposits  are  usually  made  until 
they  begin  to  bear  interest  immediately  before 
they  are  withdrawn,  it  was  spending  about 
twenty-five  per  cent  for  the  cost  of  administra- 
tion, or  the  money  was  costing  the  govern- 
ment about  3.65  per  cent.  At  the  same  time, 
the  government  was  borrowing  money  on  its 
paper  in  England  at  3.27  and  3.43  per  cent. 
Mr.  Gill  thinks  that  the  present  rate  of  three 
per  cent  is  also  too  high,  since  Canadian  three 
per  cents  sell  in  England  at  a  premium. 
But,  however,  that  may  be,  the  system  cer- 
tainly seems  to  be  unbusinesslike,  and  losses 
to  the  Treasury  in  the  past,  through  payment 
of  interest  to  the  savings  bank  depositors 
above  the  market  rate,  is  liable  to  occur  again. 
The  higher  rate  of  interest  had  better  be  pre- 
served by  allowing  the  savings  bank  more  of 
a  corporate  character,  and  allowing  a  suitable 
margin  in  the  investment  of  funds. 


POSTAL   SAVINGS   BANKS   IN   CANADA      417 

The  objection  to  the  present  poHcy,  that  the 
rate  paid  tends  to  stimulate  the  cost  of  capital 
to  the  common  injury  in  raising  rates  when 
capital  is  so  much  needed  to  develop  the  re- 
sources of  the  country,  is  not  quite  clear.  On 
this  point  Mr.  Massey  Morris  says : 

"  It  must  be  remembered  that  competition 
by  the  government  in  this  branch  of  the 
banking  business  is  not  merely  a  matter  affect- 
ing the  chartered  banks — were  it  so  it  might 
very  well  be  allowed  to  pass  without  remark. 
The  government  is  an  institution  which  is  by 
its  nature  removed  to  a  very  large  extent  from 
most  of  the  influences  which  operate  on  pri- 
vate corporations,  and  is  in  a  position,  within 
much  wider  limits  than  confine  private  cor- 
porations, to  make  its  own  conditions,  with- 
out reference  to  the  natural  laws  governing 
the  accumulation  and  distribution  of  wealth. 
In  the  exercise  of  this  exceptional  power,  the 
Canadian  government  has  generally  main- 
tained the  rate  of  interest  on  deposits  in  its 
savings  banks  at  a  point  above  that  which 
free  competition,  under  equal  conditions,  w^ould 
have  determined.  The  chartered  banks,  which 
hold  more  than  twice  as  large  an  amount  of 
deposits  as  all  the  other  deposit- receiving 
agencies  in  the  country  combined,  have  had 
to  follow  suit ;  the  discount  rate  has  been  ad- 
justed to  the  rate  paid  on  deposits,  and  in  this 
way  the  government's  participation    in   the 


418  SAVINGS    INSTITUTIONS 

banking  business  has  had  the  effect  of  a  tax 
upon  the  whole  community,  and  has  tended 
to  retard  the  development  of  the  country's 
industries. ' ' 

It  does  not  appear  how  an  interest  rate  of 
three  per  cent  could  set  the  pace  on  money 
loans  so  as  to  appreciably  affect  the  rates  of 
bank  discount.  In  fact  the  government  might 
abandon  its  present  arbitrary  policy  of  fixing 
the  rate  and  invest  the  funds  at  the  market 
rate  entirely,  and  provide  a  considerably 
higher  rate  of  interest.  A  liberal  business 
policy,  in  which  the  post-office  bank  invest- 
ments were  made  on  the  same  terms  that  are 
afforded  to  private  corporations  or  individuals, 
as  in  the  case  of  the  trustee  banks  in  the  States, 
might  easily  secure  to  the  depositors  a  net  in- 
terest rate  of  four  per  cent.  The  difficulty 
does  not  seem  to  reside  in  the  arbitrary  use  of 
power  on  the  part  of  the  government  in  fix- 
ing the  rate  of  interest,  but  in  the  competi- 
tion between  a  government  savings  bank  and 
a  commercial  bank,  which  is  proven  by  the 
experience  of  Canada  to  bo  real  and  not  fan- 


POSTAL  SAVINGS   BANKS   IN  CANADA      419 

oiful.  If  the  rates  of  discount  are  higher,  is 
it  not  because  the  banks  are  induced  to  bid  for 
the  small  deposits  ?  Is  it  not  the  attractive- 
ness of  the  state  savings  bank  which  calls  for 
a  counter  attraction  by  the  commercial  banks 
in  the  form  of  a  savings  bank  appendage  ? 

Another  cause  of  complaint  is  the  high  limit 
set  to  deposits.  An  account  was  limited  in 
amount  to  $1,000  and  the  amount  which 
might  be  deposited  within  a  year  was  limited 
to  $300  until  1892,  when  these  maxims  were 
increased  to  13,000  and  $1,000  respectively. 
For  several  years  the  amount  of  the  with- 
drawals had  exceeded  the  deposits.  The 
crediting  of  interest  to  depositors  preserved  a 
favorable  balance  until  1889-90,  when  an 
actual  shrinkage  of  the  money  credited  to  de- 
positors commenced  and  continued  until  this 
restorative  was  applied.  It  was  therefore  a 
measure  prompted  by  a  desire  for  a  favorable 
showing.  To  satisfy  it  an  appeal  was  made 
to  a  better  conditioned  class  of  people,  and  the 
scheme  proved  to  be  entirely  successful  from 
this  point  of  view. 


420  SAVINGS    INSTITUTIONS 

From  the  point  of  view  of  bankers  and  of 
money  lenders,  however,  the  change  was  from 
bad  to  worse.  One  critic  claims  that  a  maxi- 
mum of  $500,  with  a  provision  for  the  invest- 
ment of  any  excess  in  the  name  of  the  depos- 
itor in  state  securities,  would  serve  every 
legitimate  savings  bank  purpose.  It  is  charged 
that  this  high  limit  makes  it  a  capitalistic  in- 
stitution. And  this  seems  to  be  the  fact. 
But  it  is  rather  singular  that  we  hear  no  sug- 
gestion that  a  lesson  be  taken  from  the  ex- 
perience of  Belgium  and  Italy  and  that  the 
rate  be  graduated  in  the  interest  of  the  small 
accounts. 

AUSTRALIA 

In  sharp  contrast  to  the  slow  progress  made 
by  Canada  in  postoffice  savings  stands  the 
rapid  progress  of  the  sister  colonies  of  Aus- 
tralia, where  the  system  is  in  use  in  all  save 
South  Australia.  However  it  must  be  noted 
that  the  best  record  among  these  colonies  has 
been  made  by  the  one  that  has  never  developed 
the  postal  system,  and  the  poorest  records  by 


POSTAL  SAVINGS  IN  BRITISH  COLONIES      421 

the  two  which  rely  almost  exclusively  upon 
them.  South  Australia  had  in  1897  twenty- 
nine  savings  bank  depositors  to  every  100  of  the 
population,  while  the  two  colonies  that  rely 
most  exclusively  upon  the  postal  system, 
Queenstown  and  West  Australia,  had  only 
twelve  and  sixteen  respectively,  to  the  100 
of  population. 

OTHER   BRITISH    COLONIES 

Of  still  greater  interest  in  their  poUtical  and 
social  aspects  are  the  state  savings  institutions 
where  complex  race  problems  exist,  as  in  the 
case  of  the  Cape  of  Good  Hope  in  South 
Africa,  British  Guiana  in  South  America,  Al- 
giers, India,  and  Ceylon. 

One  of  the  institutions  of  the  admirable 
government  of  the  Cape  Colony  is  a  postal 
savings  bank.  It  was  founded  in  1884  and 
since  that  time  the  Postmaster-General  de- 
scribes its  success  as  "  phenomenal  ".  Tliis 
was  the  successor  to  the  Government  Savings 
Bank  established  in  1872  and  administered  by 
Civil  Commissioners,  but  when  the  post-office 


422  SAVINGS    INSTITUTIONS 

savings  bank  was  established,  the  accounts  of 
the  Government  Savings  Bank  were  trans- 
ferred to  it.  1 

The  postal  savings  principle  has  taken  some 
root  among  the  Latin  countries  of  America. 
From  the  foregoing  discussion,  it  will  be  clear 
enough  that  the  Latin  people  need  such  an 
institution,  and  they  especially  need  it  in  their 
work  of  civilizing  and  developing  the  savage 
races  with  whom  they  have  to  deal. 

Japan  has  founded  a  system  of  postal  sav- 
ings, and  her  recent  successes  in  industry  and 
government  would  seem  to  promise  a  fair 
measure  of  success.  There  likewise  seems  to 
be  no  reason  why  such  an  institution  should 
not  thrive  in  China. 

^  The  composite  character  of  the  population  is  indicated  in 
in  the  following  table  showing  the  amount  to  the  credit  of  dif- 
ferent classes  for  the  years  1895  and  1896: 

East  Indies     Portugese     Chinese     Aborigines   Creoles,  etc. 
Number....  1,175  131  3  3  4,054 

1896 40,742  8,285  438  57  96,268 

1895 43,054  4,644  41  60  76,611 

Increase 3,644  396  19,655 

Decrease....  2.312  2 


CHAPTER  XIII 

CONCLUSION 

No  resume  of  the  forgoing  chapters  seems 
necessary.  It  is  sufficient  to  recall  in  a  sen- 
tence that  the  economic  and  social  value  of  a 
widespread  power  in  saving  has  been  consid- 
ered, that  the  best  instruments  for  developing 
this  power  have  been  reviewed,  and  that  the 
conclusion  has  been  finally  reached  that  the 
post-office  type  is  the  best  adapted  to  do  the 
work  which  representatives  of  the  other  types 
leave  undone,  and  that  it  is  on  the  whole  the 
best  fitted  to  the  social  needs  of  people  of  all 
sorts  of  social  conditions.  Having  reached  this 
conclusion  it  may  be  helpful  to  close  with  a 
review  of  some  of  the  features  which  would 
seem  to  bring  the  postal  system  to  the  highest 
stage  of  perfection. 

The  following  may  be  enumerated  as  the 
most  orthodox  of  these:  (a)  freedom  of  with- 

(423) 


424  SAVINGS    INSTITUTIONS 

drawal  and  of  deposit  through  any  office,  by 
post  or  by  wire  (where  the  postoffice  includes 
a  telegraph  service)  without  cost  to  the  de- 
positor, having  regard  for  the  convenience  of 
the  working  classes,  (6)  the  right  of  depositing 
and  withdrawing  through  letter  carriers,  (c) 
the  distribution  of  all  the  net  earnings  among 
the  depositors  in  the  form  of  interest. 

Finally  we  may  deduce  from  the  foregoing 
the  following  theses  touching  the  capacity  of 
the  institutions  studied  to  develop  the  saving 
habit : 

First — Insurance  associations  are  considered 
to  be  of  doubtful  utility,  when  voluntary  in 
character,  and  bad,  when  compulsory.  ^ 

^  The  adverse  opinion  in  the  case  of  compulsory  insurance 
does  not  rest  upon  inductive  proof,  but  it  seems  to  be  accord- 
ing to  fundamental  tendencies  in  human  nature  that  it  should 
tend  to  dull  the  sense  of  providence.  On  the  other  hand  Dr. 
Edward  A.  Ayres  in  his  inaugural  dissertation,  Berlin,  1901, 
on  ArbeitenerfdcJierung  und  Armenpfli'f/C  undertakes  to  show 
that  there  has  been  no  such  effect  in  Germany  vmder  the  sys- 
tem of  compulsory  insurance,  and  cites  a  rapid  increase  in 
wages,  and  the  very  satisfactory  increase  in  the  patronage  of 
saving  banks,  especially  in  the  small  accounts.  It  is  the  pres- 
ent author's  opinion,  however,  that  the  bad  effects  have  not 
been  realized  by  reason  of  the  phenomenal  industrial  awaken- 
ing in  Germany. 


CONCLUSION  425 

Second — That  building  and  loan  associations 
and  co-operative  banks  are  excellent  as  far  as 
they  extend,  but  they  do  not  reach  those  who 
are  most  in  need  of  cultivating  saving  and 
they  find  rootage  only  in  scattered  districts. 

Third—Municipal  savings  banks  are  adapted 
to  strong  and  pure  municipal  governments, 
and  where  such  conditions  obtain  they  reach 
the  most  intensive  results,  but  they  inevitably 
leave  considerable  territory  unoccupied. 

Fourth — The  trustee  system  is  adapted  to  a 
community  which  combines  conservatism 
with  considerable  philanthropic  spirit.  It  has 
the  advantage  of  extraordinary  elasticity  of 
form,  and  may  be  made  to  fit  into  industrial 
and  social  conditions  beyond  the  reach  of  other 
types.  On  the  other  hand  it  is  hable  to  de" 
generate  into  an  investment  society  for  the 
better  conditioned  classes,  and  it  cannot  be  re- 
lied upon  to  reach  into  the  small  communities, 
nor  to  cover  a  wide  extent  of  territory. 

Fifth — The  postal  savings  banks  are,  at 
the  least,   an  invaluable  supplement  to  any 


426  SAVINGS    INSTITUTIONS 

other  system,  or  systems.  It  is  the  only  sys- 
tem that  assures  f aciUties  for  saving  to  every 
community  in  the  country.  It  sometimes 
evidences  a  capacity  for  drawing  the  patronage 
from  other  institutions,  even  to  their  frequent 
extinction,  as  in  England ;  in  other  cases  the 
existing  system  continues  to  thrive  and  ex- 
tend its  sphere  of  usefulness,  as  in  France ;  in 
any  case,  under  the  rivalry  of  a  postal  system, 
and  with  a  statutory  provision  for  the  other 
forms,  the  law  of  the  survival  of  the  fittest 
may  operate  to  secure  the  end  in  view, — the 
education  of  the  people  in  saving. 

Sixth — All  systems  should  be  governed  by 
the  principle  that  the  rate  of  interest  paid  to 
depositors  should  be  made  to  conform  to  the 
earning  power  of  the  deposits;  there  should 
be  no  profits  over  and  above  the  cost  of  ad- 
ministration. 

Seventh — The  money  should  be  invested 
with  a  view  to  security  and  attractive  re- 
turns. Attention  has  so  far  been  devoted  to  the 
former,  but  it  might,  without  sacrificing  conser- 


CONCLUSION  4:27 

vative  management,  be  shared  by  the  latter. 
Real  estate  mortgage  securities  are  now  the 
chief  resource  of  trustee  savings  banks  in 
America,  and  of  the  municipal  savings  banks 
of  Germany;  and  they  yield  higher  returns 
than  the  banks  that  are  more  restricted  in 
their  loans.  Public  securities  have  up  to  this 
time  constituted  the  most  usual  resource  of  pos- 
tal savings  banks,  and  for  the  most  part  these 
have  been  the  securities  of  the  national  govern- 
ment. There  are  two  objections  to  this  as  a  per- 
manent policy.  One  is  that  it  is  the  object  of 
governments  to  extricate  themselves  from 
debt.  The  other  is  that  coincident  with  the 
growth  in  wealth  of  a  people  their  state 
securities  increase  in  value,  i.  e.,  the  interest 
rate  diminishes,  and  the  savings  banks  suffer 
a  corresponding  loss  of  attractiveness.  The 
author  would  confer  upon  the  post-office 
department,  under  proper  safe-guards,  the 
privilege  of  placing  the  savings  deposits  left 
with  it  in  conservative  real  estate  securities. 
Eighth,  and  last — The  savings  bank  as  an 


428  SAVINGS    INSTITUTIONS 

institution  represents  the  most  conservative, 
the  most  logical  and  the  most  hopeful  scheme 
for  bettering  the  condition  of  the  laboring 
classes. 


PAETIAL  LIST  OF  AUTHOKITIES 
CONSULTED 

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2.     Series  B. 
Atres,  Edward  E. — Arheiterversicherung  und  Armenpfiege. 

Berlin,  1901. 
Bentham,  Jerry. — Essay  on  Pauper  Management,  in  which 

his  scheme  for  "  Frugality  Banks  "  is  described,  published 

in  1793,  and  republished  in  Bentham's  Works.     London, 

1843. 
BOhm-Bawerk. — Positive    Theory  of  Capital.     Article    on 

Functions  of  saving,  in  Annals  of  American  Academy 

of  Political  and  Social  Science  for  January,  1901. 
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Lexis'  Handworterbuch  der  StaatsmssenscTiaften,  Vol.  IV. 
BosTEDO,  L.  G. — Article  on  The  Function  of  Saving,  in  An- 
nals of  American  Academy,  for  January,  1901. 
Brown,  Mary  Wilcox — The  Development  of  Thrift.     New 

York,  1899.     Article  on  Industrial  Insurance  in  Charities 

Review  for  May,  1898. 
Crager, — Article  on  Ereditgenossenschaften,  in  Lexis'  Hand- 

wdrterhach.  Vol.  IV. 
CuRTius,  E. — On  Roman  Savings  Banks,  in  G5ttingen  OeUhr- 

ten  Ameiger,  1864. 
Commons,  John  R. — Article  on  The  Right  to  Work,  in  Arena 

for  February,  1899. 
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New  York,  1898. 
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Giving  Alms,  described  in  Conrad's  Handworterbuch,  Vol. 

V,  p.  786. 

(429) 


430  SAVINGS    INSTITUTIONS 

Dexter,  Seymour. — Co-operative  Savings  and  Loan  Associa- 
tions.    New  York,  1894. 

Drape. — Das  SparkassenweMn. 

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EwEN,  Robert. — Article  on  Savings  Bank  Reform,  in  West- 
minster Review  for  February,  1897. 

FiAMiNGo,  GiusippE. — Article  on  Peoples'  Banks  in  Italy  in 
Le  Siecle,  Paris,  November  18th,  1895. 

Gernardo. — Bienfaisance  Politique,  Vol.  III. 

Gill,  R. — Article  on  Postal  Savings  Banks,  in  Journal  of 
Canadian  Bankers'  Association  for  July,  1893. 

Hake,  A.  Egmont. — Article  on  Peoples'  Banks,  in  Journal  of 
the  Institute  of  Bankers,  June,  1899. 

Hamilton,  James  H.— Article  on  The  Relation  of  Postal 
Savings  Banks  to  Commercial  Banks,  in  American  Acad- 
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Article  on  Educational  Aspects  of  Saving,  in  Quarterly 
Journal  of  Economics  for  October,  1898.  Article  on  A 
Neglected  Principle  in  Civic  Reform,  in  Journal  of  Soci- 
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Harrison,  Dwight. — Discussion  of  Subject  of  Treasurers' 
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Herknek,  Heinrich.  — Der  Arheiterfnuje.     Berlin,  1897. 

Hermans,  Carl. — Pamphlet  on  Savings  Banks  in  Schriften 
der  Centralstelle fur  Arbeiter-  Wolf(ihrtseinri(Mung,  No.  6. 

Heyden. — Statistisclie  Addresshuch   Sparkassen  Deutschlaiids. 

Hermann,  Emanuel. — Die  Thearieder  Versichei-ung.  Vienna, 
1897. 

HiRN,  Antoine  E. — A  History  of  Banking  in  Russia,  in 
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HoBSON,  John. — Evolution  of  Modern  Capitalism.  New 
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AUTHORITIES   CONSULTED  431 

Fourth  Annual  Meeting  of  United  States  Local  Building 
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LoNGUiNiNE,  W. — The  Artels  and  the  Co-operative  Movement 
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Maltbie,  Milo  B. — Municipal  Functions,  Constituting  the 
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Malthus. — Essay  on  Population. 

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Mill,  James. — Commerce  Defended. 

Mill,  John  Stuart — Principles  of  Political  Economy. 

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Post. — Musterstddten. 

Reeves,  W.  Pember. — Article  on  Old  Age  Pensions  in  New 
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Review,  May,  1898. 

RiCARDO,  David. — Principles  of  Political  Economy. 

Robertson,  John  M. — The  Fallacy  of  Saving.  New  York, 
1892. 

RoscHER,  Karl. — System  der  Volkswirtschaft.  Postsparkassen- 
und  Lokalsparkassen.     1894. 

Say,  Jean  Baptiste. — Political  Economy,  tr.  from  fourth 
edition  of  the  French.     Philadelphia,  1841. 

Shaw,  Albert. — Municipal  Government  in  Europe.  New 
York,  1895. 

Smith,  Adam. — Wealth  of  Nations. 

Spender.— The  State  and  Pensions  in  Old  Age. 


432  SAVINGS    INSTITUTIONS 

Steuart,  Sir  James. — Political  Economy. 

Stone,  Charles  L. — Address  published  in  the  History  and 

Manual  of  the   Onondaga  County  Savings  Bank.     Syra- 
cuse, 1895. 
Sumner,  William  Graham. — Banks  of  All  Nations.     New 

York,  1896. 
TowNSEND,  J.  P. — Article  on   Savings  Banks,  in  Sumner's 

Banks  of  All  Nations. 
Veblin,  Thorstein  B. — Theory  of  the  Leisure  Class.     New 

York,  1899. 
Veget. — De  re  militare. 

Walker,  Francis  A. — Political  Economy.   New  York,  1888. 
Webb,     Sydney    and    Beatrice. — Industrial    Democracy. 

London,  1897. 
WiLLOUGHBY,   W.    F. — Workingmen's    Insurance.     Boston, 

1896.     Article  on  General  Savings  and  Old  Age  Pension 

Bank  in  Belgium,   in  Journal  of  Political  Economy  for 

March,  1900. 
Woedtke. — Article  on  Invaliditdts  und  Alterversicherung ,  in 

Lexis'  Handworterbuch,  Vol.  IV. 
Wolff,  Henry. — Peoples  Banks.    London,  1896.     Article  on 

Savings  Banks  at  Home  and  Abroad,  in  Journal  of  Royal 

Statistical  Society,  June,  1898. 
Xenophon. — Economics.     London,  1857. 
Zeicher. — Article  on  Unfallversicherung,  in  Lexis'  Handwor- 

terbuch..  Vol.  V. 


INDEX 

PAor 

Agricultural  banks  in  Belgium 236 

American  savings  banks 185 

Australian  post-office  savings  banks 420 

Austrian  post-office  savings  banks 391 

Banche  Popolari  in  Italy 241 

Banques  Populaires  in  Belgium 238 

Belgian  system  of  post-office  banks 357 

Building  and  loan  associations 129 

Canadian  post-office  savings  banks 409 

Cape  Colony  post-office  savings  banks 421 

Capital  the  result  of  saving 13,  25 

Casse  Rurali  in  Italy 245 

Check  system  in  Austria 323,  391 

Church's  influence  on  savings  in  Italy 248 

Church  patronage  of  savings  banks 156 

Classification  of  savings  banks 165 

Commercial  banks  compared  with  savings  banks 153,  161 

Competition  between  savings  and  commercial  banks 318 

Conclusions 423 

Conrad's  argument  for  postal  savings  in  Germany 294 

Consumption  influenced  by  saving 30 

Co-operative  insurance 94 

Co-operative  savings  banks 165,  175,  184,  223 

Degenerate  tendencies  influenced  by  saving 34 

Deindividualizing  effects  of  modern  industry 50 

Discriminating  interest  rate 359,  371 

(433) 


434  SAVINGS    INSTITUTIONS 

Page 

Distribution  of  wealth 29 

Ecoiaomists'  view  of  saving 9 

Educational  aspects  of  saving 42 

Employers'  savings  banks 214 

England's  post-office  savings  banks 330 

England's  employer's  liabilitj'  act 105 

Finland's  post-office  savings  bank 407 

Fire  insiu'ance  through  the  postal  banks  in  Begium 367 

French  post-office  savings  banks 381 

Friendly    societies 95 

German  system  of  state  insurance 108 

German  system  of  municipal  savings  banks 256 

Government  annuities 344 

Government  stock  purchased  for  depositors 321 

Hamburg,  the  home  of  the  first  savings  bank 155 

Holland's  post-office  savings  banks 375 

Hungarian  post-office  savings  banks 404 

Incidents  of  saving 19 

Insurance 88,  294 

By  the  state 108,  345 

Joint  contributions  to  funds 100,  217 

Union  labor  and 97 

Interest,  rate  in  England 341 

Discriminating  rate  in  Belgium 359 

In  Italy 371 

Investment  of  funds 317 

Italian  post-office  savings  banks 369 

Labor  power  affected  by  saving 27 

Laws  governing  savings  banks  in  the  United  States 206 

In  Germanj- 270 

Malthus,  on  population 43,  46 

On  savings  banks 150 


INDEX  435 

Page 

Mandeville  on  luxury 31 

Maxima  limits  to  accounts 321,  338,  359,  371 

McCulloch  on  saving  and  capital ■ 26 

Mill,  S.,  on  relation  between  saving  and  capital 14 

Mill,  James.,  on  distinction  between  saving  and  hoarding.  15 

Municipal  savings  banks 166,  174,  201,  256,  294 

New  York  savings  banks 185 

Old  age  pensions  in  New  Zealand 117 

Out-of-work  insurance  in  Switzerland 118 

In  Cologne 124 

Pawn  shops  and  savings  banks 259 

Periodicity  of  deposits 275 

Popular  writers  on  saving 10 

Piincely  patronage  of  savings  banks 156 

Psychology  of  saving 21,  56,  59 

Raiflfeissen  system  of  savings  banks 228 

Railway  savings  banks 218 

Ricardo's  theory  of  wages 43,  47,  151 

Rosclier's  argument  against  the  post-office  system 289 

Russian  post-office  savings  banks 405 

Say  on  productive  consumption 16 

Scherle  system 275 

School  savings  banks 61,  68,  70,  339 

Schultze-Delitsch  system,  in  Germany 227 

In  Belgium 238 

In  Italy 241 

In  Russia 250 

Smith  on  saving  and  productive  power 12 

State  savings  banks 166,  168,  170,  175,  300 

Steuart  on  luxury 31 

Sweden's  post-office  savings  banks 388 

Tenement  house  reform  and  savings  banks 277 


436  SAVINGS    INSTITUTIONS 

Pasb 
Trustee  savings  banks 167,  170,  181 

Unions  du  Credit  in  Belgium 237 

Utopian  tendencies 42,  53,  60 

Walker  on  relation  between  saving  and  social  welfare. ...  16 

Wanamaker  on  savings  banks 206 

Withdrawals  by  letter  and  wire 34a. 


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